Service  Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

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DA hiked by 6 per cent, to benefit 1 crore government staff, pensioners : 24-03-2016


On the eve of Holi festival, the government today hiked dearness allowance (DA) by 6 per cent, benefiting over 1 crore central government employees and pensioners.

The hike, which will cost the exchequer an additional Rs 14,724.74 crore annually, will take effect from January 1, 2016, Telecom Minister Ravi Shankar Prasad told reporters after the meeting of the Union Cabinet which took the decision.

The burden on exchequer would be Rs 6,795.5 core towards central government employees and Rs 7,929.24 crore towards pensioners during 2016-17, he said.

The DA, which will benefit, 50 lakh central government employees and 58 lakh pensioners, will go up from the existing 119 per cent to 125 per cent.

Dearness allowance is paid as a portion of basic pay of employees to neutralise the impact of inflation. Pensioners get dearness relief.

The central government revises DA twice in a year on the basis of one year average of retail inflation for industrial workers as per a pre-determined formula.

In September last year, DA was increased to 119 per cent from 113 per cent with effect from July 1, 2015.

In April last year, the government had hiked DA by 6 percentage points to 113 per cent of the basic pay with effect from January 1, 2015.

Source : PTI

RBI revises liquidity measuring rules for Basel III : 24-03-2016


The Reserve Bank has revised certain rules on measuring liquidity for Basel-III norms, providing exemption to branches of foreign banks from submitting statement with regard to foreign currency.

In view of developments since the issue of circulars regarding Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards, feedback received from the stakeholders and experience gained, it has been decided to amend certain provisions of these guidelines, RBI said in a notification.

The revision also includes asking banks to exclude certain loans backed by deposits from liquidity coverage ratio calculations.

As branches of foreign banks do not hold any foreign currency, they are exempted from submitting this statement with effect from the date of this circular, the revised guidelines said.

All banks in India, including branches of foreign banks are required to report this on a monthly basis, going by the existing norms.

The revised guidelines comes into effect from February 1, 2016.

Source : Business Standard

‘Customs not justified in asking for CVD plus 4% special duty’ : 24-03-2016


We refer to the notification 12/2016-CE dated March 1, 2016 that amends S. No. 144 of the notification no. 12/2012-CE dated March 17, 2012 so as to fully exempt excise duty on ready mix concrete (RMC) manufactured at construction sites for use in construction at such sites. Can we remove part of the RMC manufactured at one site to another site on duty payment?

The explanation to that S. No. 144 says, “for the purpose of this entry, the expression ‘site’ means any premises made available for the manufacture of goods by way of a specific mention in the contract or agreement for such construction work, provided that the goods manufactured at such premises are solely used in the said construction work only.”

So, it appears that unless the entire production of RMC manufactured at site is used solely at the site, the exemption will be denied even for RMC used at the site. So it is better to avoid removal of any RMC manufactured at one site to another site, even on duty payment. It is better to seek clarification on this matter.

On re-import of exported goods, we have claimed exemption under notification 94/96-Cus dated December 16, 1996. Since we had not claimed any export benefits except clearance of goods without excise duty payment under UT-1, we have sought clearance of the goods on payment of excise duty not paid as per S. No. 1 (d) of the Table annexed to that notification. Are thecustoms justified in asking us to pay CVD at the current excise duty rate and also ask for four per cent special additional duty on that?

The notification exempts so much of the duty of customs leviable thereon which is specified in the said First Schedule, the additional duty leviable thereon under section 3 of the said Customs Tariff Act and special duty of customs leviable under sub-section (1) of section 68 of the Finance (No. 2) Act, 1996 (33 of 1996), as is in excess of the amount indicated in the corresponding entry in column (3) of the said Table.

Since the said Column (3) of S. No. 1(d) in the Table mentions only ‘amount of Central Excise duty not paid’, you need not pay anything more. I see no justification for customs to demand CVD at the current excise duty rate or ask for four per cent special additional duty on that.

We have obtained an EPCG authorisation for import of our capital goods but we want to procure the item from a domestic manufacturer. We have got an invalidation letter issued in his favour so that he can obtain an advance authorisation to import his inputs duty free. Can we now get the capital goods from him without excise duty payment?

No. There is no exemption notification to enable supply of capital goods to EPCG authorisation holders without payment of excise duty. However, refund of excise duty paid on the capital goods can be claimed under deemed export provisions either by the supplier or recipient of the capital goods.

Source : Business Standard

Notification No. F. No. A-42011/03/2016-Ad.II 23-3-2016


Notification for CRC phase-2 Incorporation – F. No. A-42011/03/2016-Ad.II – Dated 23-3-2016 – Companies Law

GOVERNMENT OF INDIA

MINISTRY OF CORPORATE AFFAIRS

Notification

New Delhi, 23rd March, 2016

S.O. (E) - In exercise of the powers conferred by sub-sections (1) and(2) of section 396 of the Companies Act, 2013 (18 of 2013) (hereinafter referred to as the Act), the Central Registration Centre (herein after referred to CRC) established vide notification number. S.O. 218(E) dated 22nd  January 2016 shall also exercise functional jurisdiction of processing and disposal of e-forms and all related matters  pertaining to registration of companies under section 7, 8 and 366 of the Companies Act, 2013 having territorial jurisdiction all over India.

2. The CRC shall process forms pertaining to registration of companies i.e. e-forms (INC-2, INC-7 and INC-29 along with linked forms INC-22, DIR-12 and URC-1 and any other forms as may be notified by the Central Government) filed along with the prescribed fee as provided in the Companies (Registration of Offices and Fees) Rules, 2014.

3. The jurisdiction, processing and approval of name or names proposed in e-Form number INC-29 hitherto exercised by the respective Registrar of companies having  jurisdiction over incorporation of companies under theCompanies Act, 2013 and the rules made thereunder shall forthwith be exercised by Registrar, CRC.

4. The jurisdictional Registrar of companies, other than Registrar CRC, within whose jurisdiction the registered office of the company is situated shall continue to have jurisdiction over the companies incorporated by the Registrar, CRC under the Companies Act,  2013  for all other provisions of the Act and the rules made thereunder, which may be relevant after incorporation.

5. This notification shall come into force from 28th March, 2016.

[F. No. A-42011/03/2016-Ad.II]

(Manoj Kumar)

Joint Secretary to the Govt. of India

Notification No. F. No. 01/13/2013 CL-V(Pt-I) 23-3-2016


Companies (Incorporation) Second Amendment Rules, 2016 – F. No. 01/13/2013 CL-V(Pt-I) – Dated 23-3-2016 – Companies Law

Government of India

Ministry of Corporate Affairs

NOTIFICATION

New Delhi, 23rd March, 2016

G.S.R. .-In exercise of the powers conferred by sub-sections (1) and (2) of Section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Incorporation) Rules, 2014, namely:-

1.    (1) These rules may be called the Companies (Incorporation) Second Amendment Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2.   In the Companies (Incorporation) Rules, 2014, in the Annexure, for Form No. INC-11, the following form shall be substituted, namely:-

“Form No.INC-11

GOVERNMENT OF INDIA

MINISTRY OF CORPORATE AFFAIRS

Central Registration Centre

Certificate of Incorporation

[Pursuant to sub-section (2) of section 7 of the Companies Act, 2013 and rule 8 the Companies (Incorporation) Rules, 2014]

I hereby certify that <name of the company> is incorporated on this (i.e. FIRST, SECOND etc.) day of <Month of approval of work item in words> two thousand <YEAR of approval of work item in words> under the Companies Act. 2013  and that the company is <limited by shares/limited by guarantee/unlimited company>.

The CIN of the company is <CIN>.

Given under my hand at < Name of the city where the RoC  Office is located > this < Date of approval of the work item in words (i.e FIRST, SECOND etc.)> day of< Month of approval of the work item in words > <YEAR of approval of the work item in words

DSC

<Full name of the Authorising officer approving the work-item>

<Assistant Registrar of Companies/ Deputy Registrar of Companies/ Registrar of Companies>

For and on behalf of the Jurisdictional Registrar of Companies

Registrar of Companies

Central Registration Centre

Mailing Address as per the records available in Registrar of Companies office:

< Name of the company >

< Address of the correspondence/registered office of the company >”.

[F. No. 01/13/2013 CL-V(Pt-I)]

Amardeep Singh Bhatia, Joint Secretary

Note: The principal notification was published in the Gazette of India, Part II, Section 3, Sub-section (i) vide number G.S.R. 250(E) dated 31th March, 2014 and subsequently amended vide the following notifications:-

Serial Number

Notification Number Notification Date

1.

G.S.R. 349 (E) 01-05-2015

2.

G.S.R. 442 (E) 29-05-2015

3.

G.S.R.    99 (E) 22-01-2016

 

Notification No. : 21/2016 Dated: 23-03-2016


Income-tax (8th Amendment) Rules, 2016 – 21/2016 – Dated 23-3-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

[CENTRAL BOARD OF DIRECT TAXES]

NOTIFICATION No. 21/2016

New Delhi, the 23rd March, 2016

INCOME-TAX

S.O. 1206 (E).- In Exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1.   (1) These rules may be called the Income-tax (8th Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962, in rule 17C, after clause (viii), the following clause shall be inserted, namely:-

“(ix) Investment in “Stock Certificate” as defined in clause (c) of paragraph 2 of the Sovereign Gold Bonds Scheme, 2015, published in the Official Gazette vide notification number G.S.R. 827(E), dated the 30th October, 2015.”.

[F. No. 142/1/2016-TPL]

(R Lakshmi Narayanan)

Under Secretary (Tax Policy and Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii) vide number S.O. 969 (E) dated the 26th March, 1962 and last amended vide notification number S.O. 1155 (E) dated 18th March, 2016.

As March 31 tax-saving deadline nears, few options to choose from : 23-03-2016


It is just over ten days left to accomplish investments for claiming maximum tax exemption for the financial year 2015-16. Every tax assessee plans his/her investments and spreads it out across various instruments specified under section 80C of the Income Tax Act, 1961 (80C investments) to avail maximum tax benefit. The overall total limit for deduction under this section is Rs 1.5 Lakhs. This amount can be claimed irrespective of the assesse is an employee or self-employed.

Section 80C allows certain investments to be tax-exempt. It also allows tax exemption on incurring certain expenditure like principal amount of home loan, education fee for children. Deduction u/s 80C is available only to Individual or a Hindu Undivided Family (HUF).

If you haven’t yet made the investment for tax-saving purposes and are wondering where to invest your savings, there are a lot of options under the Income Tax Act. Below are some of the key investments/expenditure which qualify for the deduction under section 80C which you can choose from before March 31:

Provident Fund (PF) & Voluntary Provident Fund (VPF): PF is deducted from your salary. There are two portions of contributions: employer’s and employee’s. Portion of Employer’s contribution is exempt from tax, whereas employee’s contribution is counted towards 80C investments. An additional amount can also be contributed voluntarily (VPF). Interest on PF is exempt from tax.

Public Provident Fund (PPF): Deposit in PPF is limited to Rs 1.5 lakhs. One can deposit in PPF and count towards section 80C investments. Interest on PPF is exempt from tax.

Life Insurance Premiums: Life insurance premium paid for yourself, your spouse or your children is covered under this deduction. Premiums paid for more than one policies are eligible for counting under this section.

Equity Linked Savings Scheme (ELSS): Some mutual fund (MF) schemes are especially created for offering tax savings, and these are called Equity Linked Savings Scheme, or ELSS.

National Savings Certificate (NSC) (VIII Issue): Investment in NSC instrument is eligible for section 80C tax benefit. NSC is a time-tested tax saving instrument with a maturity period of five and ten years. The accrued interest which is deemed to be reinvested qualifies for deduction under Section 80C. However, the interest income is chargeable to tax in the year in which it accrues.

Fixed Deposit with Scheduled Bank: Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.

5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although available for varying time duration like one year, two years, three years and five years, only 5-Yr post-office time deposit (POTD) qualifies for tax saving under section 80C. The Interest is entirely taxable.

NABARD rural bonds: There are two types of bonds issued by NABARD (National Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C.

Unit linked Insurance Plan: ULIP stands for Unit linked Saving Schemes. ULIPs cover Life insurance with benefits of equity investments.

Infrastructure Bonds: The investment in infrastructure bonds issued by the infrastructure companies is eligible for deduction under Section 80C.

Pension Funds: Section 80CCC investment limit is clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and 80C is Rs. 1.50 Lakh. This also means that your investment in pension funds uptoRs. 1.50 Lakh can be claimed as deduction u/s 80CCC.

Loan Principal Repayment: The equated monthly instalment (EMI) is made to home loan consists of two components – principal and interest. The principal component of the EMI qualifies for deduction under Sec 80C, whereas the interest component is eligible for tax savings under section 24 of the Income Tax Act.

Stamp Duty and Registration Charges for a home: Stamp duty paid for buying a house is deductible expense under section 80C in the year of purchase of the house.

Sukanya Samriddhi Account: This scheme is a special deposit scheme launched last year for maximum two girl child. The money to be deposited is for 14 years in this account.Interest earned on this account is exempt from tax.

National Pension Scheme (NPS):Beyond the investments allowed under section 80C, section 80CCD(1A)and section 80CCE allows further deduction of contribution towards New Pension Scheme (NPS). This contribution is available in two portions: employee and employer.

Employee contribution in NPS: Eligible for tax deduction of up to 10% of salary or 10% of total gross income under section 80CCD(1A), within the limit of Rs 1.5 lakhs mentioned above.

Eligible for additional tax deduction of upto Rs. 50,000 under section 80CCD(1B) over and above limit of Rs. 1.5 lakhs.

Employer contribution in NPS: Eligible for tax deduction of upto 10% of salary under section 80CCD(2) without any upper cap.

It is the best time when investments can still be made and avail tax benefit for the financial year 2015-16 if not done so far.

Source :

Report of the Committee on Taxation to Examine the Business Models for E-Commerce : 23-03-2016


Report of the Committee on Taxation to Examine the Business Models for E-Commerce
A Committee on Taxation of e-commerce was constituted by the Central Board of Direct Taxes to examine the business models for e-commerce, identify the direct tax issues in relation to e-commerce transactions and suggest an approach to deal with these issues. The Committee included officers of the Central Board of Direct Taxes, representatives from the industry, the Institute of Chartered Accountants of India and tax experts. The Report of the Committee was received by the Government and taken into consideration in the preparation of Finance Bill, 2016. This Report provides the view of the Committee on issues related to taxation of e-commerce and recent international developments in this area.The Report is available on the website of the Income Tax Department

Source : PTI

Companies Bill: Layering restrictions on investment cos’ removed : 23-03-2016


 

India Inc has cause for cheer as the new Companies Bill has gone the whole hog to remove the restrictions around structuring of companies, giving them complete flexibility in designing efficient structures.

Both the existing layering restriction on investment companies and the one preventing certain class of companies from having more than the specified number of subsidiaries are proposed to be done away with.

Enabling provisions to this effect form part of the Companies (amendment) Bill 2016 introduced by Finance Minister Arun Jaitley in Lok Sabha last Wednesday (March 16).

The Companies Act 2013 had stipulated that a company can make investment through not more than two layers of investment companies.

The proposal to remove such restrictions should be seen as part of the government’s effort to improve the ease of doing business in India, say corporate law experts.

““These are welcome proposals in the new Bill. It would give freedom to companies to design and structure investments”, Lalit Kumar, Partner, J Sagar Associates, a law firm, said.

S.N.Ananthasubramanian, former President of the Company Secretaries Institute and advisor to several banks, said that work around tactics of compliance is sought to be tackled through a laissez faire approach.

“Read with steps to allow companies to have unrestricted object clause, this move seeks to significantly enhance the ease of doing business in the country”, Ananthasubramanian told BusinessLine.

Panel report

The government’s plan to do away with layering restrictions essentially flows out of the recommendations of the 10-member Companies Law Committee, which proposed 100 amendments to the existing company law enacted in 2013 by the UPA government.

In its report, submitted in late January this year, the committee had suggested that the layering restriction on investment companies be done away with. It had noted that there may be several legitimate business justifications for use of a multi-layered structure and such restriction hampers the ability of a company to structure its business.

It also felt that layering restrictions may become too obtrusive and impractical in the modern business world. Regulatory concerns arising out of earlier scams were also noted.

The committee said that sufficient safeguards have been built into the oversight mechanism of market regulator SEBI and stock exchanges, and the recommendations on Beneficial Ownership register requirements should dispel the regulatory concerns.

In India, most large corporate empires are controlled through ingeniously constructed pyramid of ownership, where the percentage of equity investments in the holding company is generally very small.

Companies Act 2013

The Companies Act 2013 was not the first instance when the government sought to rein in on any form of multi-tiered investment structures.

Even in 2003 — during the term of the earlier NDA regime, the Government had attempted to restrict the number of investment companies that could be floated by promoters. However, this did not see the light of the day.

Out of the 470-odd sections of the new Companies Act 2013, the Government has already notified 283 for implementation.

After the constitution of the National Company Law Tribunal and National Company Law Appellate Tribunal, most of the remaining 186 sections of the Company Law will be brought into force, sources said.

Source : The Hindu

 

Is VPF a good way to save for your retirement? : 22-03-2016


Madan Menon is a middle-aged government employee who is not too aware about investment products available today. However, he saves diligently, contributing as much as possible to his provident fund. He wants to invest the proceeds in post office saving schemes when he retires. He has been systematically increasing his contribution to the Voluntary Provident Fund (VPF) every year. Is he doing the right thing?

VPF is a contribution made by an employee towards the provident fund corpus, with no matching contribution from the employer. Since the amount is automatically deducted from the salary, it cultivates disciplined investing. The investment earns a fixed interest each year, as declared by the government, and the contributions are eligible for deduction under Section 80C of the Income Tax Act, up to a maximum of Rs 1.5 lakh each year.

The primary limitation here is Menon will not end up with a very sizeable corpus at retirement, having invested all his money in a fixed-interest paying instrument. To deal with inflation after he retires, he will need a large corpus, and the best way to build it is to use his earning years well. Over time, investments in assets such as equity mutual funds can grow much larger. Given his preference for safe investments, it is all the more important that he gives his corpus a chance to grow.

By starting an SIP in a diversified equity fund, and mandating his bank to deduct the amount on a specific date each month, he not only gets into the saving habit, but also give his money the chance to grow faster. Together with his PF contribution, this is a good way for Menon to invest in both a safe fixed income product and a long-term growth oriented product. Menon should keep in mind that the rules for withdrawal, loans and taxation for PF also apply to his VPF contributions. These  may be modified by the government, as proposed in Budget 2016-17 (and then rolled back), which would put him at the risk of ending up with all his investment eggs in one basket. Some diversification would therefore serve him well over the long term.
Source : Economic times

 

Amendment to Rule 6(3) of CCR involving ‘exempted services’ – a dangerous development : 22-03-2016


Taxindiaonlinelogo-jpg

By S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate

WITH effect from 1-4-2016, in Rule 6 of the CCR, 2004, Sub-rules (2), (3), (3A) and (3B) have been substituted, in terms of which, a manufacturer/provider of taxable and exempted services shall pay an amount equal to 6%/7 % of the value of the exempted services subject to a maximum of the total credit available in the account of the assessee at the end of the period to which the payment relates, or pay an amount as determined under the new sub-rule (3A). The new rule has laid down the formula in terms of which, the portion of the common credit attributable to the exempted services would have to be reversed…but about this highly complicated formula requiring arithmetical skills to understand, later..

The newly inserted Explanation 3 reads as under:

“For the purposes of this rule, exempted services as defined in clause (l) of rule 2 shall include an activity, which is not a ‘service’ as defined in section 65B(44) of the Finance Act, 1994.”

This explanation is very dangerously worded, inasmuch as, any activity that is not treated as a ‘service’ under Section 65B(44) of the Finance Act, 1994 will be treated as an exempted service for the purpose Rule 6(3) and consequently, the quantum of the common credit attributable to exempted services that would need to be reversed, would go up significantly.

A reading of this new Explanation 3 would suggest that, activities such as sale of immovable property, interest income, income from actionable claims, etc. which are specifically mentioned in the exclusive part of the definition of ‘service’ under Section 65B(44) of the Finance Act, 1994 would get treated as exempted services. Thus, for a real estate developer, the activities involving receipt of interest income, proceeds from sale of immovable property, etc. would get treated as exempted services and the quantum of credit that would need to be reversed under Rule 6(3) would go up substantially.

Be that as it may…the new Explanation 3, as it is worded, also could lead to certain absurd situations wherein, even a pure sale transaction could get treated as an exempted service.Thus, if a manufacturer sells one of its office buildings, the sale proceeds could be treated as ‘exempted services’ necessitating a reversal of the common credit.

As it stands, even the sale of goods could get treated as exempted services, as the activity of sales can be treated as an activity, which is not a service. Taking the example of a car manufacturer who sells cars and also renders repair services of cars sold, the value of the cars sold, being an activity, could be treated as exempted services, resulting in a larger component of the common credit being required to be reversed.

Taking this discussion forward…. In the case of a works contractor, who is treated as a seller of goods as also a provided of services (to the extent of the ‘service’ portion of the works contract), the sale portion in respect of which, VAT is paid, could get treated as ‘exempted services’ for the purpose of Rule 6(3)

As TIOL readers can see…the new explanation is dangerously worded and could result in a significant increase in the quantum of the common credit to be reversed under Rule 6(3). Industry Associations would do well to ask for this new definition of ‘exempted services’ for the limited purpose of Rule 6(3) to be scrapped. One is not able to understand the rationale for this development, except to satisfy the sadistic pleasure of some Babus sitting in North Block.

If the Department interprets this new definition of exempted services to include sale value of goods, etc., it should be prepared to face litigation including issues challenging the constitutional validity of this new development, as in my strong view, the service tax law cannot get into issues concerning sale of goods, immovable property, etc.

Of course, sub-rule (3B) continues to give the benefit to banks and financial institutions to have the option of paying, on a monthly basis, an amount equal to 50% of the credit availed on inputs and input services in that month.

Before concluding….

One benefit flowing out of the substituted Rule 6(3)/(3A) is that, the default rule would be the reversal of the proportionate common credit, if the manufacturer/service provided does not intimate the Department of his choice as to whether he would want to go under the reversal route of elect to pay 6%/7% of the value of exempted services. In the current system, the Department has been insisting that the manufacturer/service provider should pay service tax at the percentages specified under sub-rule (3A), in case he has not intimated the Department of his choice. Further, under the substituted rule, it is clearly mentioned that the credit attributable to taxable services would not form part of the common credit necessitating the reversal process. This has been effected probably to get over the effect arising out of the Mumbai CESTAT decision in THYSSENKRUPP INDUSTRIES (I) PVT LTD Vs COMMISSIONER OF CENTRAL XCISE, PUNE reported in 2014-TIOL-1825-CESTAT-MUM, wherein, the Tribunal had held that, the credit that would need to be considered for reversal under Rule 6(3A) would be the total credit and not the common credit, in the absence of an amendment to the statute. The Government has rightly responded, in what could be termed as an industry friendly move.

Till now, many assessees have been taking the view than an activity that cannot be considered a service in the first place, cannot also be considered as an exempted service, for purposes of reversal of common credit. This view can no longer hold.

Even the current version of Rule 6(3) has been so confusing that many Audit Teams have thought it fit not to look into the reversal of common credit. The new formula read with the amended definition of ‘exempted services’ is bound to confuse matters further. In my view,the onus would be on the Department to prove that, some credit of inputs and/or input services has been used for providing the activities that would now be covered under the amended definition of ‘exempted services’ and without this, the assessee can take a justifiable stand that, he is not required to reverse the proportionate credit.

As a Chartered Accountant, I found it difficult to understand the new formula, even after several rounds of reading. It is anybody’s guess as to how the hapless assessee would understand the new law relating to reversal of common credit attributable to exempted services.

These developments do not augur well for a Government that keeps talking of ‘ease of doing business’.

Lastly…. we must bear in mind that the new sub-rules have been ‘substituted’ with effect from 1-4-2016. As students of law, we know that the effect of a substitution is that, it changes the law from the time the relevant provisions have been in the statute. Thus, can the Department seek to apply the new definition of ‘exempted services’, vis-à-vis Rules 6(3)/(3A) for the periods earlier to 1-4-2016? The assessee can always fight these attempts by taking the view that, being a retrograde provision seriously affecting the rights of the assessee, the provision cannot be retrospectively applied. Of course, the assessee can also take the view that the other positive effects arising out of the Rule including the default option being the reversal of the common credit, have to be retrospectively applied, being beneficial provisions.

Cannot all the bright minds in the TRU come together and carve out a simple yet practical rule 6 of CCR?

EFS INSTRUCTION NO. 55 – 22-3-2016


U/s 276CC of Income Tax Act 1961 – Identify the potential cases for prosecution – Order-Instruction – Dated 22-3-2016 – Income Tax

EFS INSTRUCTION NO.55

DATED 22-3-2016

As per Central Action Plan 2015-16, Systems Directorate was directed to identify the potential cases for prosecution under section 276CC (prosecution for non-filing of return of income). Earlier, non-filers for AY 2013-14 were identified by Systems Directorate for NMS Cycle-3. The last date for filing the return of income for the AY 2013-14 was 31-3-2015, and therefore the taxpayers identified under NMS Cycle-3 that have neither filed the return of income nor have submitted the response have been identified as potential prosecution cases under section 276CC.

2. These cases have been pushed into a functionality named “Actionable Information Monitoring System (AIMS) (Path: ITD→ EFS → CIB → AIMS). The functionality provides an option to view ITS information and to mark the case as “Proposed for prosecution” and “Not proposed for prosecution”. The EFS Instructions are available on i-taxnet (Path: Resources → Downloads → Systems → ITD Instructions → Instruction -EFS/CIB).

3. The Assessing Officers may be instructed to view the information and take necessary action under section 276CC if the conditions prescribed under section 276CC are fulfilled.

[F. NO. JDIT(S)-2(4)/SYSTEMS DIRECTORATE/CBDT/011/2014-15]

F. No. DIT(S)-2/Form26QB/100/2015 – 22-3-2016


Correction of statement cum challan relating to TDS on sale of property u/s 194IA of the IT Act Withdrawal of Standard Operating Procedure (SOP) – Circular – Dated 22-3-2016 – Income Tax

DIRECTORATE OF INCOME TAX (SYSTEMS)

E-2, GROUND FLOOR, A.R.A. CENTRE, GROUND FLOOR,

JHANDEWALAN EXTENSION, NEW DELHI-110055

F. No. DIT(S)-2/Form26QB/100/2015

Date: 22.03.2016

To,

All Principal CCsIT, PCsIT and CIT(CO) & Admn.

Sir /Madam,

Sub: Correction of statement cum challan relating to TDS on sale of property u/s 194IA of the IT Act Withdrawal of Standard Operating Procedure (SOP)-reg.

Kindly refer to the above.

2. Section 194IA of the IT Act relates to TDS on Sale of property. Form 26QB is an  online statement- cum-challan to be filled and submitted by the buyer of the property for making TDS payment on sale of property. It contains details of buyer, seller, property being sold, sale consideration, tax deposit details etc. Being an internet challan, no correction can be made by the bank branches through the existing RT18 mechanism.

3. Keeping in view various representations received, SOP vide F. No. DIT(S)-2/Form 26QB/100/2015 dtd 20/04/15 was issued for processing the requests of change in form 26QB, on case to case basis, as per defined rules, till such time that an alternative online approach was finalised. Accordingly, the office of the ADGIT(S)-2 has been processing applications requesting for correction in form 26QB.

4.  Now, CPC-TDS has enabled functionality for online correction in form 26QB from 29/02/2016. Communication No. CIT/CPC-TDS/15-16 dtd 02/03/2016 on ‘Enablement of 26QB correction facility and role of TDS officers’ from CPC-TDS is enclosed.

5. In view of the online functionality being made available, the SOP dated 20/04/15 for correction in form 26QBchallan is being withdrawn with immediate effect. The field formations and taxpayers may be advised to use the functionality made available by CPC-TDS.

Yours faithfully

(Sanjeev Singh)

Addl. Director General (System)-2

Enclosure : As above

 

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AST INSTRUCTION NO.141 – 22-3-2016


Selection of Scrutiny for Cases Selected Manually on Basis of Recommendations of CPC for Assessment Year 2013-14 – Order-Instruction – Dated 22-3-2016 – Income Tax

AST INSTRUCTION NO.141

DATED 22-3-2016

Communications have been received from field offices that the Assessing Officers are unable to view the reasons for selection for scrutiny in the ITD system for the cases which are manually selected on the basis of suggestions by CPC as the window to retrieve the reasons has been disabled.

2. The functionality for viewing such cases which are selected by AO under Manual Scrutiny on the basis of suggestions by CPC for A.Y. 2013-14 and for which order under section 143(3) of the Act has still not been passed, has been enabled in the ITD system and can be accessed by entering the following path in ITD System:

“AST → Processing → CPC Interface → List of scrutiny cases from CPC”

[F. NO. DGIT(S)/ADG(S)-2/CASS/2014-15

Why some states could delay real estate regulator Bill : 22-03-2016


The Real Estate Regulation Bill may trigger a Centre-state clash as some states, including Maharashtra, Haryana and West Bengal, already have similar rules in place.

The Real Estate (Regulation and Development) Bill, 2013, passed in Parliament recently, seeks to create a set of rights and obligations for developers and buyers. Developers will now have to set aside 70 per cent of sales proceeds from a project in an escrow account and get mandatory approvals before launching a project. Also, buyers and developers will be paying the same interest rate on defaults. This, however, is a model Bill and states can have their own rules based on it.

Many developers have already started bargaining with state governments to not bring under-construction projects in the ambit of the Bill. Many have also requested state governments for a less stringent imprisonment clause.

Experts say the Bill differs from existing laws in many states. States can continue to apply their laws regulating real estate as long as they are not contradicting the central one.

According to PRS Legislative Research, while the central Bill mandates establishing a statutory regulatory authority to register projects in a state, West Bengal has delegated this function to a government department.

The clause mandating 70 per cent of the funds collected from buyers of a project to be kept in an escrow account is also inconsistent with the new Bill as many states have allowed for greater flexibility in usage of funds.

While Maharashtra Housing Regulation and Development Act, 2012 mandates that the entire amount collected from buyers be kept in a separate account, the draft Haryana Real Estate (Regulation and Development) Bill, 2013 mandates at least 70 per cent of the amount collected from buyers be used for the particular project.

Punjab, West Bengal and Uttar Pradesh have hinted they would prefer to continue with existing state laws on real estate, PRS said. This will make it difficult to have one set of regulations across India.

Pankaj Kapoor, founder and CEO, Liases Foras, a real estate research firm, says states are bound to follow the model Bill.

“It is in favour of the consumer. It is mandatory for them to follow the model under a section of the Constitution. Although they can delay the implementation of the Bill, ultimately they will have to do it.”

 

Minister for urban development Venkaiah Naidu has been seeking cooperation from states for faster clearances to projects to make this Bill, which will override all state legislations, a success. “Our ultimate intention is to ensure consumer satisfaction. Once the Bill is notified, you will get more investments in the real estate sector, early clearances and property prices will come down.”

 

After the Bill is put into place, it will make it mandatory for all residential and commercial projects to register with the regulator. It also provides for imprisonment of up to three years in case of promoters and up to one year in case of real estate agents and buyers for any violation of orders of Appellate Tribunals or monetary penalties or both.

 

The mandatory registration for projects has been brought down to 500 sq m area, or those comprising eight flats. Also, a clear definition of carpet area and a system that would require the consent of two-thirds of the buyers in case there are changes in project plans.
INCONSISTENT RULES
  • While the central Bill mandates establishing a statutory regulatory authority, West Bengal has delegated this to a government department
  • While the central Bill says that 70% of the funds collected from buyers of a project should be kept in an escrow account, some state governments have allowed for greater flexibility
  • The Maharashtra Housing Regulation and Development Act, 2012, mandates the entire amount collected from buyers be kept in a separate account
  • States such as Punjab, West Bengal and Uttar Pradesh say they would prefer to continue with existing laws to regulate real estate
  • Experts say while the central rules will eventually overrule the state norms, some states might delay implementation

Source : Business Standard

Notification No. S.O. 1217(E) 21-3-2016


Rescinding of a sector specific Special Economic Zone for food processing and related services at Hassan in the State of Karnataka – S.O. 1217(E) – Dated 21-3-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 21st March, 2016

S.O. 1217(E).-WHEREAS, M/s. Karnataka Industrial Area Development Board, a fully owned State Industrial Promotion Organization in the State of Karnataka, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for food processing and related services at Hassan in the State of Karnataka;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 159.733 hectares at above Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 573(E) dated 12th April, 2007;

AND, WHEREAS, M/s. Karnataka Industrial Area Development Board vide their letter dated 3rd January, 2008 has proposed for reduction of the area from 159.733 to 115.33 ha at the above Special Economic Zone;

AND, WHEREAS, the Board of Approval (BoA) in its 22nd Meeting held on 25th February, 2008 has approved the above reduction in area subject to the condition that no tax benefits have been availed by the developer for the area to be deleted.

AND, WHEREAS, M/s. Karnataka Industrial Area Development Board has now proposed for full denotification of 159.733 hectares area at the above Special Economic Zone;

AND, WHEREAS, the State Government of Karnataka has given its “No Objection” to the proposal vide letter No. VTPC/SEZ/KIADB-NOC/DD/2014-15, dated 13th July, 2015;

AND, WHEREAS, the Development Commissioner, Cochin Special Economic Zone has recommended the proposal for full de-notification of the Special Economic Zone;

NOW, THEREFORE, in exercise of the powers conferred by first proviso to rule 8 of the Special Economic Zones Rules 2006, the Central Government hereby rescinds the above notification except as respects things done or omitted to be done before such rescission.

[F. No. F. 2/387/2006-SEZ]

DR. GURUPRASAD MOHAPATRA, Jt. Secy.

RBI rejects banks’ demand to defer MCLR : 21-03-2016


The Reserve Bank of India has rejected bankers’ demand to defer the operationalisation of MCLR, or marginal cost of funds based lending, even as many lenders said that they are not ready to adopt the system. The new system will be operational from April 1 and many banks fear that their margins will be hit if the new method is implemented, while others said that the cost of lending could also go up.

In a closed-door meeting held recently between senior RBI and bank officials, the central bank told lenders that it doesn’t want to extend the deadline since it was conveyed to them in December itself.

MCLR is a new method that banks will have adopt to declare the lending rates, and it will replace the base rate. The new rate has to be a tenor-linked rate with a reset clause at least once a year. For the customer, the MCLR that is prevailing on the day the loan is sanctioned, will be in application till the next reset even if the benchmark rate changes.

MCLR is a new method that banks will have adopt to declare the lending rates, and it will replace the base rate. The new rate has to be a tenor-linked rate with a reset clause at least once a year. For the customer, the MCLR that is prevailing on the day the loan is sanctioned, will be in application till the next reset even if the benchmark rate changes.

On the calculation of MCLR, the RBI has said that banks have to fac tor in the incremental cost of funds and not the average cost. Therefore, margins of banks with huge share of fixed rate loans and higher share of low cost deposits will not be hurt.

However, in case of a falling interest rate scenario, interest rates of new deposits would not come down as fast as the reset on the new loans.Thus, the banks’ incremental cost may fall marginally in six months, but a large chunk of loans could be due for reset either on monthly or quarterly basis, thereby hurting banks margins -the difference between the cost of funds and yield on investments. The new method is introduced after the RBI felt that policy rate transmission was not effective under the base rate system -the rate at which banks lend to best-rated borrower. The RBI has lowered policy rates -which is the repo rate -by 125 basis points over the past 15 months. But banks have lowered interest rates by just about 60-70 basis points.

Bankers complained that they were unable to pass on the rate cut benefits to borrowers since rates on liabilities side-on deposits were at a fixed rate, while rates on the loan books were on a floating rate basis.

 Source : PTI

Small savings rates cut: PPF, senior citizen scheme, deposits to earn less : 21-03-2016


The government on Friday sharply reduced interest rates on small savings schemes across the board, including that on Public Provident Fund, Senior Citizen Savings Scheme and announced the highest reduction of 130 basis points in the case of one-year time deposit, as per an office order issued by the finance ministry. The rates on small savings schemes have been reduced to align them to market rates.

Since the government is now moving on revising interest rates on such schemes every quarter, the new rates, therefore, will be applicable from April 1 to June 30. Effective April 1, interest rate payable on 1 year time deposit has been slashed to 7.1 per cent from 8.4 per cent.

Interest rate on Public Provident Fund (PPF) scheme will be cut to 8.1 per cent for the period April 1 to June 30, from 8.7 per cent, at present. Rate on Kisan Vikas Patra is being lowered to 7.8 per cent from 8.7 per cent. Interest rates on Sukanya Samriddhi Account Scheme, which was launched by Prime Minister Narendra Modi especially for the girl child, too are being reduced to 8.6 per cent from 9.2 per cent.

Terming the decision slashing of interest rates as a “normal exercise of resetting” rates in March every year, Economic Affairs Secretary Shaktikanta Das said, according to a report.
“This will enable banks to consequently reduce their deposit rates and extend loan and credit to public and borrowers at lower rates.” Interest rate on five-year Senior Citizen Savings Scheme has also been reduced to 8.6 per cent from 9.3 per cent. The popular five-Year National Savings Certificates will earn an interest rate of 8.1 per cent as against 8.5 per cent. A five-year Monthly Income Account will fetch 7.8 per cent as opposed to 8.4 per cent now.
The government had on February 16 announced moving small saving interest rates closer to market rates, but said that the interest rate and the spread that some of these schemes enjoy will remain untouched. However, on Friday the government slashed rates on all schemes.
In its February 16 statement, the finance ministry had said: “The Sukanya Samriddhi Yojana, the Senior Citizen Savings Scheme and the Monthly Income Scheme are savings schemes based on laudable social development or social security goals. Hence, the interest rate and spread that these schemes enjoy over the G-sec rate of comparable maturity viz., of 75 bps, 100 bps and 25 bps respectively have been left untouched by the Government.” On Friday, however, the rates on these three scheme were reduced by 60-70 basis points.

While the interest rate on Post Office savings has been retained at 4 per cent, the same for term deposits of one to five years has been cut. Two-year time deposit will now earn 7.2 per cent instead of 8.4 per cent, three-year time deposit will earn 7.4 per cent instead of 8.4 per cent, five-year time deposit will earn 7.9 per cent instead of 8.5 per cent. Five-year recurring deposit will earn 7.4 per cent instead of 8.4 per cent.
Arguing that such rates limit the banking sector’s ability to lower deposit rates in response to the monetary policy of the RBI, Centre had made a case for lowering rates on some schemes. The RBI has cut the repo rate, by 125 basis points since last January, but the banks reduced their lending rate by only about 70 basis points. The RBI is slated to review its monetary policy on April 4.

Source : Business Standard

Notification No. : 20/2016 Dated: 21-03-2016


M/s. Ascendas IT Park (Chennai) Ltd. Notified as an industrial park for the purposes of Section 80-IA(4) – 20/2016 – Dated 21-3-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 20/2016

New Delhi, the 21st March, 2016

(INCOME-TAX)

S.O. 1172(E).- Whereas the Central Government in exercise of the powers conferred by clause(iii) of sub-section (4) of section 80-IA of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the said Act), has framed and notified a scheme for industrial park, by the notification of the Government of India in the Ministry of Finance (Department of Revenue, Central Board of Direct Taxes) vide number S.O. 51(E), dated the 8thth January, 2008;

And whereas M/s. Ascendas IT Park (Chennai) Ltd. having its registered office at 1st Floor, Pinnacle Building, International Tech Park, CSIR Road, Taramani, Chennai – 600 113 has developed an industrial park named “Crest” and “Zenith” at Plot No.9, Survey No.TS 8/1, Block No.9 Survey No.TS1/7, Block No.7, Survey No.TS 9/2 Block No.9 and Survey No.TS 1/1, Block No.7, Kanagam Village Thiruvanmiyur Village, Mambalam-Guindy Taluk/ Mylapore-Triplicane Taluka, Chennai, Tamil Nadu – 600 113.

Now, therefore, in exercise of the powers conferred by clause (iii) of sub-section (4) of section 80-IA of the said Act, read with rule 18C of the Income-tax Rules, 1962, the Central Government hereby notifies the undertaking from the date of commencement of the industrial park that is the 31st March, 2011 being developed and being maintained and operated by M/s. Ascendas IT Park (Chennai) Ltd., as an undertaking and the project named “Crest” and “Zenith” placed at Plot No. 9, Survey No.TS 8/1, Block No. 9, Survey No. TS1/7, Block No. 7, Survey No. TS 9/2 Block No. 9 and Survey No. TS 1/1, Block No. 7, Kanagam Village Thiruvanmiyur Village, Mambalam-Guindy Taluk/ Mylapore-Triplicane Taluka, Chennai, Tamil Nadu–600 113 for the purposes of the said clause (iii) subject to the terms and conditions mentioned in the Annexure to this notification.

ANNEXURE

The terms and conditions on which the approval of the Government of India has been accorded for setting up of an industrial park by M/s. Ascendas IT Park (Chennai) Ltd.

(i) Name of the industrial undertaking : M/s. Ascendas IT Park (Chennai) Ltd.
(ii) Proposed location : Plot No.9, Survey No.TS 8/1, Block No.9 Survey No.TS1/7, Block No.7, Survey No.TS 9/2 Block No.9 and Survey No.TS 1/1, Block no.7, Kanagam Village Thiruvanmiyur Village, Mambalam- Guindy Taluk/ Mylapore-Triplicane Taluka, Chennai, Tamil Nadu – 600 113.
(iii) Minimum constructed floor area : 15,000 square meters.
(iv) Proposed industrial activities : As defined in Industrial Park Scheme, 2008 notified by the Government of India, Ministry of Finance (Department of Revenue, Central Board of Direct Taxes) vide notification Number. S.O. 51(E), dated the 8th January, 2008.
(v) Percentage of allocable area earmarked for industrial use : 75% or more.
(vi) Percentage of allocable area earmarked for commercial use : 10% or less.
(vii) Minimum number of industrial units : 30 units.
(viii) Date of commencement : 31st March, 2011.

2. The industrial park shall be construed as developed on the date of its commencement that is, the 31st March, 2011.

3. The industrial park should be owned by one undertaking.

4. The tax benefits under the Income-tax Act, 1961 shall be available to the undertaking only if minimum number of thirty industrial units are located in the industrial park and for the purpose of computing the minimum number of industrial units, all units of a person and his associated enterprises shall be treated as a single unit.

5. No industrial unit, alongwith the units of an associated enterprise, shall occupy more than twenty five per cent. of the allocable area.

6. The tax benefits under the Income-tax Act, 1961 shall be available only to the undertaking notified by this notification and not to any other person who may subsequently develop, develops and operates or maintains and operates the notified industrial park, for any reason.

7. The undertaking, subject to the fulfillment of the term and conditions mentioned in this notification, may at its option claim deduction under clause (iii) of sub-section (4) of section 80-IA of the Income-tax Act, 1961 for any ten consecutive assessment years out of fifteen years beginning from the assessment year relevant to the date of commencement of industrial park mentioned in this notification.

8. The industrial units located in the industrial park shall undertake only those activities as specified in Industrial Park Scheme, 2008 mentioned above.

9. The undertaking shall keep separate books of accounts for the industrial park and shall file its income tax returns by the due date before the Income-tax Department.

10. This notification shall be invalid, if-

(i) the application on the basis of which the approval is accorded by the Central Government contains wrong information or misinformation or some material information has not been provided in it;

(ii) it is for the location of the industrial park for which approval has already been accorded in the name of another undertaking,

and M/s. Ascendas IT Park (Chennai) Ltd. shall be solely responsible for any repercussions of such invalidity.

11. The undertaking shall furnish an annual report to the Central Board of Direct Taxes in Form IPS-II as provided in the Industrial Park Scheme, 2008 mentioned above.

12. The terms and conditions mentioned in this notification as well as those included in the aforesaid Industrial Park Scheme, 2008 should be adhered to during the period for which benefits under the said scheme are to be availed and in case the undertaking, fails to comply with any of the conditions, the Central Government may withdraw the aforesaid approval.

13. Any amendment of the project plan without the approval of the Central Government or detection of such amendment in future, or failure on the part of the undertaking to disclose any material fact, shall invalidate the approval of the industrial park.

[F. No. 178/34/2011-ITA-I]

DEEPSHIKHA SHARMA, Director

FinMin reiterates stand on jewellery excise, as GST preparation : 18-03-2016


While the jewellery trade continues its stir for withdrawal of the one per cent excise duty announced in the Union Budget, the finance ministry does not indicate a compromise.

“There is no question of a rollback,” said a ministry official, on condition of anonymity, adding: “Our internal calculations show the government will get only about Rs 1,000 crore (a year) from the levy.”

The strike entered the 17th day on Thursday, also marked by a big rally at Delhi’s Ramlila Maidan.

“What are they scared of? We have given them all the assurance that they want. The taxman will not visit their premises,” said the official. The ministry has instructed field formations against interfering with the business functions of manufacturers. Instructions to tax officials say no stock declaration will be required to be made to the excise tax authorities by jewellery makers. And, tax officials have been told not visit the premises of these assessees for routine purposes like stock verification of records. And, to ensure export consignments are not delayed on account of the new levy.

The official said the one per cent duty was a preparation for the coming national goods and services tax (GST) regime. “If they cannot pay one per cent excise, how will they pay the higher tax under GST,” he asked.

A panel chaired by chief economic adviser Arvind Subramanian has proposed taxing of gold and precious metals at two to six per cent under GST, as against the standard rate of 17-18 per cent.

As against an excise exemption limit of 1.5 crore a year for normal small scale industry, the jewellery sector has an exemption limit of Rs 6 crore. Jewellers with a turnover below Rs 12 crore in a financial year will be eligible for exemption up to Rs 6 crore the next year.

Source : The EconomicTimes

Notification No. : 19/2016 Dated: 18-03-2016


Income tax (7th Amendment) Rule, 2016 – Amends rule 114E regarding Information Return or Statement of Financial Transactions – 19/2016 – Dated 18-3-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

[CENTRAL BOARD OF DIRECT TAXES]

Notification No.19/2016

New Delhi, the 18th March, 2016

S.O.1155 (E)- In exercise of the powers conferred by section 285BA, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend theIncome-tax Rules, 1962, namely:-

1. This rule may be called the Income–tax (7thAmendment) Rule, 2016 and shall be deemed to have come into force from the 1st day of April, 2015.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the Rules), in rule 114E,-

(i) in the marginal heading, after the words “Information Return”, the words “or Statement of Financial Transactions” shall be inserted;

(ii) in sub-rule (1), for the words “annual information return”, the words “annual information return or statement of financial transactions, as the case may be,” shall be substituted;

(iii) in sub-rule (4),-

(I) in clause (a),-

(A) for the word “return”, wherever it occurs, the words “return or statement” shall be substituted;

(B) in both the provisos, for the words and figure “Annual Information Return-Administrator”, wherever they occur, the words and figure “Annual Information Return or Statement of Financial Transaction- Administrator” shall be substituted;

(II) in clause (b),-

(A) in the long line, for the word “return” , the words “return or the statement” shall be substituted;

(B) in clause (ii), for the word “return”, the words “return or the statement” shall be substituted;

(iv) in sub-rule (7), for the words “Annual Information Return”, the words “Annual Information Return or Statement of Financial Transaction” shall be substituted;

(v) in this rule, except sub-rules (1), (4) and (7), for the word “return”, wherever it occurs, the words “return or statement” shall be substituted.

3. In the Appendix II to the Rules, in Form No.61A,-

(a) for the words “Annual Information Return”, wherever they occur, the words “Annual Information Return or Statement of Financial Transactions” shall be substituted;

(b) for the word “return”, wherever it occurs, the words “return or statement” shall be substituted.

4. Rule 114E of the Rules, as amended by this rule shall be applicable for the specified financial transactions carried out during the period from 1st April, 2015 to 31st March, 2016.

[F.No.142/28/2012-(SO)TPL]

(Ekta Jain)

Deputy Secretary to Government of India

Note:- The principal rules were published vide notification S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification S.O.1146 (E), dated the 17th March 2016.

Pradhan Mantri Fasal Bima Yojana : 18-03-2016


The Union Cabinet on Wednesday approved the launch of Pradhan Mantri Fasal Bima Yojana (Prime Minister Crop Insurance Scheme) in which the premium rates to be paid by the farmers have been brought down substantially so as to enable more farmers avail insurance cover against crop loss on account of natural calamities. The scheme will come into effect from the upcoming kharif season.

Under the new scheme, farmers will have to pay a uniform premium of two per cent for all kharif crops and 1.5 per cent for all rabi crops. For annual commercial and horticultural crops, farmers will have to pay a premium of 5 per cent. The remaining share of the premium, as in previous schemes, will continue to be borne equally by the Centre and the respective state governments.

 With farmers having been required to pay a premium share of as high as 15 per cent in several areas in the country, there has been a long-standing discussion on the need to bring down these rates. The Centre’s move to bring down and cap these interest rates is being viewed as a major government policy outreach towards the farmers.

The Centre currently has a bill of Rs 3,100 crore on account of its share of the premium for the 23 per cent crops that are currently insured in the country. Once 30 per cent of the crop comes under insurance cover, the Centre’s financial liability is estimated to go up to Rs 5,700 crore. This financial liability is expected to touch a whopping Rs 8,800 crore once the target of bringing 50 per cent crop under insurance is achieved in three years, officials said. As the Centre’s financial liability goes up, the bill of the states where the scheme gets implemented will also go up correspondingly.

Under PMFBY, there will no upper limit on government subsidy and even if balance premium is 90 per cent, it will be borne by the government. “Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers. This capping was done to limit government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction,” the government said. “The use of technology will be encouraged to a great extent. Smart phones will be used to capture and upload data of crop cutting to reduce the delays in claim payment to farmers. Remote sensing will be used to reduce the number of crop cutting experiments,” the government said. The new Crop Insurance Scheme will also seek to address a long standing demand of farmers and provide farm level assessment for localised calamities including hailstorms, unseasonal rains, landslides and inundation. Calling it a “historic” decision, Union home minister Rajnath Singh said that this scheme will act like a “safety shield” for the farmers and will protect them against the vagaries of nature. “This new crop insurance scheme will have the lowest premium for farmers in the history of independent India. The new scheme has taken care of the anomalies in the existing two schemes and added new provisions,” Singh said. Agriculture minister Radha Mohan Singh called it a “amrit yojana” and added that the scheme will also cover post-harvest losses.

Source : PTI

SMEs, MSMEs turn to peer-to-peer lending as bank credit dips : 18-03-2016


Prolonged slowdown in the corporate sector and the rising bad loans has forced banks to squeeze funding to micro, small and medium enterprises. As a result these small businesses are increasingly turning to online platforms to raise funds.

These online portals works in the space of peer-to-peer lending (P2PL) arrangements, which allows an individual to lend money to other unrelated individuals without assistance from any financial intermediary.

“We have seen more demand coming in from the SME and the MSME sector, especially the ones that are new in the space because they find it difficult to get loan from the banks as they may not have the required income/bank documents etc in place, as a result we have seen an increased demand from this segment,” said Vaibhav Pandey, CEO of i2ifunding.com.

As per the Reserve Bank of India data, credit to small industries between January 23, 2015-January 22, 2016 grew at 2.4% as compared to 12.7% a year ago. In the same period, bank credit to medium enterprises degrew by 7.1% compared to a growth of 0.7% a year ago. According to RBI guidelines, micro and small enterprises are those in which the loan size is up to Rs 5 crore.

Shankar Vaddadi, Founder, i-lend.in, another P2P lending platform also terms the SME and MSME category as a “massive segment.”

“Since it is very difficult to get an unsecured loan for either first time borrower or people who may not have all the required documents needed by a bank. These people come on to the online platform and avail credit with ease.”

Pandey also added that with the demand ha also been increasingly coming from the new players entering the e-commerce segment.

“E-commerce has been a big driver. This is because on one hand we have new players from that segment scouting for funds. And on the other hand because several small entrepreneurs are getting to sell their products online which in turn are leading to an increased demand for capital for which they are coming to us.”

This comes at a time when the Reserve Bank of India is looking at ways to regulate this sector. Currently, it does not come under the ambit of the banking regulator. However, considering that this sector has been gaining momentum in the last couple of years, RBI is now looking at monitoring this sector.

Several online portals have sprung up in India to facilitate such lending and some have also secured private funding from investors, but it is still at a nascent stage compared with countries such as the US and China.

Source : Business Standard

Notification No. S.O. 1219(E) 17-3-2016


De-notification of 23.75.0 hectares of sector specific Special Economic Zone for Electronics/Telecom Hardware and support services including trading and logistics activities at SIPCOT Industrial Area, Sriperumbudur, Tamil Nadu – S.O. 1219(E) – Dated 17-3-2016 – Special Economic Zone

 

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 17th March, 2016

S.O. 1219(E).-Whereas, M/s. State Industries Promotion Corporation of Tamil Nadu Limited had proposed undersection 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for Electronics/Telecom Hardware and support services including trading and logistics activities at SIPCOT Industrial Area, Sriperumbudur in the State of Tamil Nadu;

And, whereas, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 189.77.1 , 41.36.9 hectares and de-notified 11.83.2 hectares at SIPCOT Industrial Area, Sriperumbudur in the State of Tamil Nadu from Special Economic Zone vide Ministry of Commerce and Industry Notifications Numbers S.O. 2141 (E) , 1308 (E) and 677 (E) dated 22nd December, 2006 , 31st July, 2007 and 02nd March, 2015 respectively;

And, whereas, M/s. State Industries Promotion Corporation of Tamil Nadu has now proposed for de-notification of 23.75.0 hectares at the above Special Economic Zone;

And, whereas, the State Government of Tamil Nadu has given its “No Objection” to the proposal vide letter No. 2495/MIE.2/2016-1 dated 22nd February, 2016;

And, whereas, the Development Commissioner, Madras Special Economic Zone has recommended the proposal for de-notification of an area of 23.75.0 hectares of the Special Economic Zone;

Now, whereas, the Central Government is satisfied that the requirements under sub-section (8) of section 3 of the said Act and other related requirements are fulfilled;

Now, therefore, in exercise of the powers conferred by second proviso to sub-section (1) of section 4 of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby de-notifies an area of 23.75.0 hectares, thereby making resultant area as 195.55.8 hectares, comprising the survey numbers and the area given below in the table, namely:-

TABLE

S. No.

Name of the Village

Survey No.

Area to de-notified (in Hectares)

(1)

(2)

(3)

(4)

1.

Sirumangadu

5 Part

0.660

2.

6 Part

0.820

3.

135Part

0.700

4.

136 Part

4.265

5.

137

1.640

6.

138

1.145

7.

139 Part

0.787

8.

150 Part

0.420

9.

151 Part

1.156

10.

152 Part

0.530

11.

153 Part

2.098

12.

154 Part

0.586

13.

155 Part

1.309

14.

156 Part

0.120

15.

157 Part

0.750

16.

Thrumangalam

351 Part

1.620

17.

352

0.670

18.

353 Part

0.565

19.

354 Part

1.642

20.

355 Part

0.717

21.

356 Part

1.550

Total

23.75.0 hectares

Total Area of SEZ after above deletion

195.55.8 hectares

[F. No. F.2/146/2006-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

Notification No. : 18/2016 Dated: 17-03-2016


Income-tax (6th Amendment) Rules, 2016 – Method of determination of period of holding of capital assets, being a share or debenture of a company, which becomes the property of the assessee in the circumstances mentioned in clause (x) of section 47. – 18/2016 – Dated 17-3-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF DIRECT TAXES

Notification

New Delhi, the 17th March, 2016

S.O. 1146 (E).- In exercise of the powers conferred by section 2, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (6th Amendment) Rules, 2016.

(2) They shall come into force from the 1st day of April, 2016.

2. In the Income-tax Rules, 1962, after rule 8A, the following rule shall be inserted, namely:-

“8 AA. Method of determination of period of holding of capital assets in certain cases.- (1) The period for which any capital asset, other than the capital assets mentioned in clause (i) of the Explanation 1 to clause (42A) of section 2 of the Act, is held by an assessee, shall be determined in accordance with the provisions of this rule.

(2) In the case of a capital asset, being a share or debenture of a company, which becomes the property of the assessee in the circumstances mentioned in clause (x) of section 47 of the Act, there shall be included the period for which the bond, debenture, debenture-stock or deposit certificate, as the case may be, was held by the assessee prior to the conversion.”

[Notification No. 18/2016][F.No.142/1/2016-TPL]

[Ekta Jain]

Deputy Secretary (Tax Policy & Legislation)

Note:- The principal rules were published vide notification number S.O. 969 (E), dated the 26th March, 1962 and last amended vide notification S.O.No.1101 (E), dated the 15th March , 2016.

8/2016 – 17-3-2016


Modification of Instruction 9/2006 – Circular – Dated 17-3-2016 – Income Tax

ircular No. 8/2016

F. No.24619512013-A&PAC-I

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

New Delhi, 17th March, 2016

Subject:- Modification of Instruction 9/2006- reg.

Instruction 9 of 2006 lays down the guidelines and procedure for attending to Revenue Audit Objections. The Instruction inter-alia mandates the initiation of remedial action in case the Revenue Audit Objection is not accepted by the Department. The Board has considered the effect of such remedial action and its ultimate fate in appeal. Accordingly, to mitigate the effects of the Instruction, para 4 and para 5 of the Instruction are deleted with immediate effect and replaced by the following:

4. Remedial Action:

(i) An Audit objection should be accepted and remedial action should be taken in a case where the audit objection relating to an error of facts or an issue of law is found to be correct.

(ii) Appropriate remedial action should invariable be initiated within two months of the receipt of the Local Audit Report, and necessary orders should be passed within six months thereafter.

(iii) Where the PCIT/ CIT does not accept the Audit objection, he may record his reasons for doing so and inform the AG accordingly within two months from the date of receipt of the LAR. No remedial action needs to be taken in such cases.

5. Second appeal in cases involving Revenue Audit Objection:

The adverse order of the first appellate authority in cases involving revenue audit objections should be carefully scrutinised by the PCIT/ CIT, and appeal should not be preferred if the order is justified either in law or on facts. Reasons for not filing appeal may be recorded by the PCIT/ CIT.

(J.K Chandnani)

US (A&PAC)-II,

CBDT, New Delhi.

Lower fines, but more powers to assessing officers : 17-03-2016


On the one hand, the government is trying to reduce litigation by giving additional freedom to income-tax assessees and reducing penalties. On the other, the assessing officer (AO) has been given unlimited powers in certain situations.

A sore point that has emerged from the Finance Bill 2016 is the creation of two new categories of misdemeanours: Under-reporting and misreporting. The penalties have been pegged at either 50 per cent or 200 per cent of the evaded tax for the two categories, respectively. AOs can’t levy a rate in between at their discretion.

A more critical clause is worrying tax experts: The recourse to appeal has been more difficult for the assessee. The proposed laws say if the case is classified as one of under-reporting, the penalty can be waived off only if the assessee accepts the order and pays the relevant tax with interest within the stated period, usually 30 days. More importantly, in case the officer classifies the case as one of misreporting, there is no recourse to filing an appeal. The assessee will need to file a writ petition in a high court to challenge the order.

“According to the regulations, an assessee can go to income-tax tribunal only against the orders of the commissioner. But, if the order is passed by the AO, then the court is the only recourse as one cannot approach tribunals against the orders passed by the AO,” says Gautam Nayak, tax partner at CNK & Associates. Tax experts say this is a harsh provision and, hence, necessary changes might be made in the final Finance Bill as this goes against the principle of natural justice.

The new penalty regime could create a fresh set of complications for taxpayers. Although the government has done its best to define the two new terms, there is a fine line between what constitutes under-reporting and misreporting.

In the earlier regime, the AO could levy a penalty on the tax payer for concealment of income or for furnishing inaccurate particulars. The penalty ranged from 100 per cent to 300 per cent of the evaded tax. However, when the AO issued an order under Section 143(2), the assessee could offer an explanation. If the AO was satisfied with the explanation, the assessee had to pay only the tax. The AO had the power to waive penalty and interest.

Experts say the government has tried to explain the new terms under-reporting and misreporting.

“While no proper legal definition of what constitutes under-reporting and misreporting has been provided, the newly inserted Section 270A (which replaces Section 271) of the income tax Act, 1961, provides all that is needed to implement such penalties,” says Amar Gahlot, tax consultant at Lakshmikumaran & Sridharan Attorneys.

The government has provided a list of cases where under-reporting shall not apply. Cases of misreporting have been specified as follows: misrepresented or suppressed facts; not recorded any investment or receipt or recorded false entry in the books of account; claimed any expenditure not substantiated by evidence; and not reported any international transaction, to which transfer pricing provisions would apply. “Looking at these situations, it seems where the default seems to be malafide, it would be considered as misreporting,” says Gahlot.

Some legal experts also see a few positives for taxpayers in the new provisions. Says Rakesh Nangia, managing partner of Nangia & Co, “In the past, every case where there was a dispute led to a penalty. But now, the government has included a new clause: Where the assessee offers an explanation and the income tax authority is satisfied that the explanation is bonafide, and all the materials have been disclosed; in such cases, there will be no penalty. By including this clause, the government has ensured that many cases will not be subject to penalty.”

Adds Kuldip Kumar, partner and leader (personal tax) at PwC India: “The proposed new laws take into consideration the genuine mistakes one can possibly make and have them out of the purview of penalty.” The absence of precedents is yet another drawback. Says Delhi-based High Court lawyer Prakash Kumar: “For older terms like concealment of income and furnishing inaccurate particulars, several judgments of the High Court and the Supreme Court existed, which served as precedents. Now, it will take some time before cases based on these new terms go to the higher courts and the judges interpret these laws.”

Source : The Economic Times

Over 75% of claims paid under PM scheme : 17-03-2016


The claims settlement under the low-cost life insurance scheme, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), is going great guns with over 75 per cent of the claims paid in a remarkably fast manner.

As the financial year winds to a close, it appears that the basic objective of increasing life cover as a means of social security has been met handsomely.

As on March 3, 2016, total subscriptions to the PMJJBY scheme stood at 2.95 crore. Out of this 19,877 claims have been reported and 16,281 have been paid. While 3,339 claims are outstanding, 257 claims were rejected according to the information available with bankers and insurers. Life Insurance Corporation (LIC) of India had the maximum share in the scheme paying almost 6,582 schemes out of the 8,728 claims received. SBI Life Insurance and IndiaFirst Life Insurance occupied the second and third slots respectively.

Life insurance coverage

Only a fraction of the population is covered by insurance. Life insurance penetration as a percentage of the Gross Domestic Product (GDP) is around 3.80 per cent despite the presence of 25 public and private insurers in India. With a twin purpose of expanding coverage and keeping it affordable, PMJJBY was launched in May, 2015. Under this, adults in the age group of 18 to 50 would be covered through a group insurance scheme linked to their bank accounts for a nominal premium of ₹330 an annum.

This was in a sense an attempt to replicate the success of the PM’s Jan Dhan Yojana which achieved near total success by bringing bank accounts to all willing families.

Insurers had good reasons to demur initially. Firstly, there was no actuarial experience based on which the rate of ₹330 was decided. Secondly, while the product was designed for the poor – it was not known whether they would indeed buy it. Thirdly, safeguards were still minimal — and there were no health check ups. There was therefore a legitimate fear of underpricing the risk, and the fear of fraudulent claims. Today, 10 life insurance companies have joined in, hoping to widen their reach and setting aside whatever misgivings they may have had initially.

But after the claims started pouring in, insurers are also grappling with some of their fears coming true. Amitabh Chaudhry, MD, HDFC Standard Life, said, “There is a risk of claims occurring soon after enrolment suggesting some anti-selection. This has been experienced by some industry players.”

Possibility of fraud is also being suspected by others. RM Vishakha, MD & CEO, IndiaFirst Life, said about 30 per cent claims received by her company are of suspicious nature since they have come in within the first 45 days.

Chaudhry suggests that this risk could be mitigated if a waiting period is introduced, that is, claims occurring after a waiting period of say, three months, are considered valid.

A senior executive of SBI Life said on the condition of anonymity that in some cases, fraud cannot be ruled out.

Waiting period

As a remedy, insurers have already requested the Finance Ministry to introduce a minimum-day exposure norm.

“The high level of suspicious transactions is a tragedy. We shouldn’t penalise the other 70 per cent because of this. So, if we have a longer waiting period, I think this will reduce,’’ said Visakha.

When asked about the likely stress on companies on account of claims payout, IRDAI Chairman TS Vijayan said there was no sufficient information yet on the burden on the insurers and the experience being gained could be used for improving the scheme further. The Finance Ministry has asked for data and will take a decision soon.

Source : The Hindu

LETTER F.NO.DGIT(S)/DIT(S)-3/AST/SCRUTINY/CONSOLIDATATION OF TDS/99/2015-16 – 17-3-2016


Consolidation of TDS Entries in Cases Having More Than 1000 Entries for Scrutiny Selected Cases Pertaining to Assessment Year 2013-14 – Circular – Dated 17-3-2016 – Income Tax

LETTER F.NO.DGIT(S)/DIT(S)-3/AST/SCRUTINY/CONSOLIDATATION OF TDS/99/2015-16

DATED 17-3-2016

Kindly refer to subject matter.

2. It has been noticed in previous years that in several cases having large number of TDS claims in ITR and TDS entries in Form NO. 26AS, AOs face technical difficulty while passing the assessment order under section 143(3)on AST system towards the end of March. This is due to the large data set involved in matching and also because entire data has to be viewed by the AO on the screen which fails during March peak times due to network congestion. This problem was seen in large courier or transport companies have several 1000 TDS entries.

3. As a proactive step, this Directorate has undertaken the exercise of consolidation of TDS entries at a TAN level for assessees (PAN) having more than 1000 TDS credit entries for scrutiny selected cases pertaining to AY 2013-14. This would mean that the TDS claims in the Assessee ITR as well as 26AS entries for a particular TAN would be grouped and matched earlier itself. It has been observed that such consolidation has reduced the number of TDS rows from several 1000 to a few hundreds. This would greatly simplify the matching and computation of tax and interest at the time of passing of order before the TB date. However, it may be noted that in the event that any fresh TDS credit is reported after such consolidation, the same can be allowed later at the time of rectification.

4. The list of cases where such consolidation has been done is placed at i-taxnet at the path mentioned below. The jurisdictional AOs are advised to complete the assessment in these cases well in advance, even though the process has been simplified, to eliminate any last minute changes/difficulties.

Resources → Downloads → Systems → Instructions-AST → Consolidation of TDS entries_List of cases

5. This issues with the approval of Pr.DGIT(S).

DGBA.GAD.NO. 2968/42.01.029/2015-16 – 17-3-2016


Scheme for Collection of Dues of Financial Year 2015-16 – Circular – Dated 17-3-2016 – Income Tax

CIRCULAR DGBA.GAD.NO. 2968/42.01.029/2015-16

DATED 17-3-2016

Please refer to Circular DGBA.GAD.No.4285/42.01.029/2014-15 dated March 25, 2015 advising the procedure to be followed for reporting and accounting of collection of Direct Taxes (CBDT) and Indirect Taxes (CBEC) and transactions of Departmentalized Ministries at the Receiving/Nodal/Focal Point branches of your bank for the Financial Year 2014-15.

2. The Government of India has decided that the date of closure of Residual Transactions for the month of March 2016 be fixed as April 10, 2016 for the Financial Year 2015-16.

3. In view of the ensuing closing of government accounts for the financial year 2015-16, please reiterate the instructions to your branches regarding introduction of special messenger arrangements at your receiving branches. Receiving branches not situated locally should also adopt special arrangements such as courier service etc. for passing on challans/scrolls etc. to the Nodal/Focal Point branches so that all payments and collections made on behalf of government towards the end of March are accounted for in the same financial year.

4. As regards reporting of March 2016 transactions by Nodal/Focal Point branches in April, the branches may be advised to follow the procedure as outlined in the Annex. To sum up, the Nodal/Focal Point branches will be required to prepare separate sets of scrolls, one pertaining to March Residual Transactions and another for April Transactions during the first 10 days of April 2016. The Nodal/Focal Point branches should also ensure that the accounts for all transactions (revenues/tax collections/payments) are effected at the receiving branches upto March 31, 2016 in the accounts for the current financial year itself and are not mixed up with the transactions of April 2016. Also, while reporting transactions pertaining to March 2016 upto April 10, 2016, the transactions of April 2016 should not be mixed up with “March Residual Transactions.”

5. The procedure now followed for reporting and accounting of transactions of Non- Civil Ministries viz. Defence, Posts, Railways and Telecommunications (which was revised with effect from October 1, 1993), is similar to the procedure for reporting and accounting of transactions of Departmentalised Ministries. The special arrangements for reporting March transactions by receiving branches to Nodal/Focal Point branches and the procedure for reporting March 2016 transactions in April 2016 by Nodal/Focal Point branches as indicated in paragraphs 3 and 4 above are also applicable to the reporting of transactions of Non-Civil Ministries. The branches of your bank handling the Non-Civil Ministries transactions, if any, may, therefore, be advised to follow the above procedure.

6. Kindly issue necessary instructions in the matter to your branches concerned immediately.

ANNEX

Reporting of March Transactions

Beginning from April 1, 2016, the Nodal/Focal Point branches will segregate on a daily basis all scrolls/challans pertaining to March 2016 received from the receiving branches concerned and prepare separate main scrolls for:

(a) scrolls for transactions of March 2016 or earlier period (i.e. effected during the previous financial year 2015-16) and

(b) scrolls pertaining to current transactions (i.e. those effected from April 1, 2016 onwards).

2. The main scrolls for March 2016 transactions prepared from April 1 to April 10, 2016 are to be distinctly marked as March Residual – 1, March Residual – 2 and so on upto April 10, 2016. In other words, serial number should be allotted in consecutive order for each main scroll of March 2016 transactions sent from April 1 to April 10, 2016. These scrolls alongwith the copies of daily summary of Receipts and Payments prepared separately for March 2016 transactions will be forwarded to the Departmental Officials concerned (i.e. Zonal Accounts Officers/Pay and Accounts Officers and Designated Officers) in the usual way. The Nodal/Focal Point branches will also be required to report the above transactions to the Link Cell through separate Daily Memos. These advices must be sent to enable the Link Cell of each bank at Nagpur, to make daily settlement with Reserve Bank of India, Central Accounts Section (CAS) Nagpur. On receipt of advices from the Nodal/Focal Point branches, the Link Cell should segregate the advices for the March Residual transactions and forward them separately to Reserve Bank of India, CAS, Nagpur. This procedure should continue upto and inclusive of April 10, 2016 only. All transactions reported thereafter by the receiving branches will be reported and accounted for in the usual manner in the accounts of the month of report irrespective of the date of transaction. Following the special arrangements for March 2016 transactions, it is necessary for the Nodal/Focal Point branches to prepare two sets of DMS to be submitted to Zonal Accounts Officers/Pay and Accounts Officers for March 2016 transactions – one for transactions upto March 31, 2016 and another for March Residual Transactions adjusted by Nodal/Focal Point branches with Reserve Bank of India, Central Accounts Section, Nagpur, during April 1 to April 10, 2016.

Since the Nodal/Focal Point branch will also be reporting the April 2016 transactions pertaining to year 2016-17 in addition to March Residual transactions, monthly statement for April transactions should be compiled and furnished to Zonal Accounts Officers/Pay and Accounts Officers in the usual way. In order to distinguish the April 2016 (year 2016-17) and March Residual Transactions, the statement pertaining to March Residual Transactions should be clearly marked as “March Residual Account”.

Note: As advised in our circular GA.NB.No.376/42.01.001/1995-96 dated May 22, 1996 all the cheques/amounts realized on or before March 31, 2016 should be treated as transactions relating to the current financial year as “March 2016 or March Residual Transactions”, the reporting of which may take place during the month of April (upto April 10, 2016). But if any cheque is tendered on or before March 31, 2016 and realized on or after April 1, 2016, it will be treated as transaction for the next financial year as “April Transactions”. Accordingly, the banks will prepare separate scrolls for March 2016 and April 2016 (year 2016-17) transactions.

Notification No. : 17/2016 Dated: 16-03-2016


Agreement for Avoidance of double taxation and prevention of fiscal evasion with foreign countries – Republic of Indonesia – 17/2016 – Dated 16-3-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION NO. 17/2016

New Delhi, the 16th March, 2016

(INCOME-TAX)

S.O. 1144(E).-Whereas, an Agreement between the Government of the Republic of India and the Government of the Republic of Indonesia for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income was signed at New Delhi on the 27th day of July, 2012 (hereinafter referred to as the said Agreement);

And whereas, the said Agreement entered into force on the 5th day of February, 2016, being the date of the later of the notifications of the completion of the procedures required by the respective laws for entry into force of the said Agreement, in accordance with paragraph 2 of Article 30 of the said Agreement;

And whereas, sub-paragraph (a) of paragraph 3 of Article 30 of the said Agreement provides that the provisions of the said Agreement shall have effect in India in respect of income derived in any fiscal year beginning on or after the first day of April next following the calendar year in which the said Agreement enters into force;

Now, therefore, in exercise of the powers conferred by sub-section (1) of section 90 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies that all the provisions of said Agreement, as annexed hereto, shall be given effect to in the Union of India.

[F.No.503/4/2005-FTD-II]

RAJAT BANSAL, Jt. Secy.

AGREEMENT

BETWEEN

THE GOVERNMENT OF THE REPUBLIC OF INDIA

AND

THE GOVERNMENT OF THE REPUBLIC OF INDONESIA

FOR THE AVOIDANCE OF DOUBLE TAXATION

AND THE PREVENTION OF FISCAL EVASION

WITH RESPECT TO TAXES ON INCOME

The Government of the Republic of India and the Government of the Republic of Indonesia, desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and with a view to promoting economic cooperation between the two countries, have agreed as follows:

CHAPTER I

SCOPE OF THE AGREEMENT

Article 1

PERSONS COVERED

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2

TAXES COVERED

1. This Agreement shall apply to taxes on income imposed on behalf of a Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property and taxes on the total amounts of wages or salaries paid by enterprises.

3. The existing taxes to which the Agreement shall apply are in particular:

(a) in the case of the Republic of India:

the income tax, including any surcharge thereon;

(hereinafter referred to as “Indian tax”);

(b) in the case of the Republic of Indonesia:

the income tax;

(hereinafter referred to as “Indonesian tax”).

4. The Agreement shall also apply to any identical or substantially similar taxes that are imposed after the date of signature of the Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes that have been made in their respective taxation laws.

CHAPTER II

DEFINITIONS

Article 3

GENERAL DEFINITIONS

1. For the purposes of this Agreement, unless the context otherwise requires:

(a) the term “India” means the territory of India and includes the territorial sea and airspace above it, as well as any other maritime zone in which India has sovereign rights, other rights and jurisdiction, according to the Indian law and in accordance with international law, including the United Nations Convention on the Law of the Sea 1982;

(b) the term “Republic of Indonesia” means the territory of the Republic of Indonesia as defined in its laws, and parts of the continental shelf, exclusive economic zone and adjacent seas over which the Republic of Indonesia has sovereignty, sovereign rights or jurisdiction in accordance with the United Nations Convention on the Law of the Sea 1982;

(c) the terms “a Contracting State” and “the other Contracting State” mean the Republic of India or the Republic of Indonesia as the context requires;

(d) the term “person” includes an individual, a company, a body of persons and any other entity which is treated as a taxable unit under the taxation laws in force in the respective Contracting States;

(e) the term “company” means any body corporate or any entity that is treated as a body corporate for tax purposes;

(f) the term “enterprise” applies to the carrying on of any business;

(g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

(h) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

(i) the term “national” means:

(1) any individual possessing the nationality of a Contracting State; and

(2) any legal person, partnership or association deriving its status as such from the laws in force in a Contracting State;

(j) the term “competent authority” means:

(1) in the case of the Republic of India, the Finance Minister or his authorised representative;

(2) in the case of the Republic of Indonesia, the Minister of Finance or his authorised representative;

(k) the term “tax” means Indian or Indonesian tax, as the context requires, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Agreement applies or which represents a penalty or fine imposed relating to those taxes;

2. As regards the application of the Agreement at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time under the law of that State for the purposes of the taxes to which the Agreement applies, any meaning under the applicable tax laws of that State prevailing over a meaning given to the term under other laws of that State.

Article 4

RESIDENT

1. For the purposes of this Agreement, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both Sates, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);

(b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;

(c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;

(d) if his residential status cannot be determined by reason of subparagraphs (a) to (c) in that sequence, the competent authorities of the Contracting States shall endeavour to settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated. If the State in which its place of effective management is situated cannot be determined, then the competent authorities of the Contracting States shall endeavour to settle the question by mutual agreement.

Article 5

PERMANENT ESTABLISHMENT

1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f) a warehouse in relation to a person providing storage facilities for others;

(g) premises as sales outlet;

(h) farm or other place where agricultural, forestry, plantation or related activities are carried on; and

(i) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3. The term “permanent establishment” also encompasses:

(a) a building site or a construction or assembly or installation project or supervisory activities in connection therewith, but only if such site, project or activities last for a period of more than 183 days;

(b) a drilling rig or working ship used for exploration or exploitation of natural resources, but only if so used for a period more than 183 days;

(c) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than 91 days within any twelve month period.

4. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include:

(a) the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise;

(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display;

(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;

(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;

(e) the maintenance of fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;

(f) the maintenance of a fixed place of business solely for any combination of activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

5. Notwithstanding the provisions of paragraphs 1 and 2, where a person-other than an agent of an independent status to whom paragraph 7 applies-is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person:

(a) has, and habitually exercises, in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or

(b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise.

(c) habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself.

6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies.

7. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other Contracting State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph.

8. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

CHAPTER III

TAXATION OF INCOME

Article 6

INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property, including income from agriculture or forestry, situated in the other Contracting State may be taxed in that other Contracting State.

2. The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources. Ships and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall also apply to income derived from the direct use, letting, or use in any other form of immovable property.

4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

Article 7

BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere, in accordance with the provisions of and subject to the limitations of the tax laws of that State. However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or, except in the case of a banking enterprise, by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged, (otherwise than towards reimbursement of actual expenses), by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or, except in the case of banking enterprise, by way of interest on money lent to the head office of the enterprise or any of its other offices.

4. Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall preclude that Contracting State from determining the profits to be taxed by such an apportionment as may be customary. The method of apportionment adopted shall, however, be such that the result shall be in accordance with the principles contained in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

7. Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

SHIPPING AND AIR TRANSPORT

1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.

2. If the place of effective management of a shipping enterprise is aboard a ship, then it shall be deemed to be situated in the Contracting State in which the home harbor of the ship is situated, or, if there is no such home harbor, in the Contracting State of which the operator of the ship is a resident.

3. The term “operation of ships or aircraft” means business of transportation by sea or by air of passengers, mail, livestock or goods carried on by the owners, lessees or charterers of ships or aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of ships or aircraft and any other activity directly connected with such transportation.

4. Notwithstanding the provisions of paragraphs 1 and 2, profits from sources within a Contracting State derived by an enterprise of the other Contracting State from the operation of ships in international traffic may be taxed in the first-mentioned State, but the tax imposed in that Contracting State shall be reduced by an amount equal to 50 per cent thereof.

5. Profits derived by a transportation enterprise which is a resident of a Contracting State from the use, maintenance, or rental of containers (including trailers and other equipment for the transport of containers) used for the transport of goods or merchandise in international traffic shall be taxable only in that Contracting State unless the containers are used solely within the other contracting State.

6. For the purposes of this Article interest on investments directly connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft if they are integral to the carrying on of such business, and the provisions of Article 11 shall not apply in relation to such interest.

7. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.

Article 9

ASSOCIATED ENTERPRISES

1. Where

(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State -and taxes accordingly – profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of the Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

3. The provision of paragraph 2 shall not apply where judicial, administrative or other legal proceedings have resulted in a final ruling that by actions giving rise to an adjustment of profits under paragraph 1, one of the enterprises concerned is liable to penalty with respect to fraud, gross negligence or wilful default.

Article 10

DIVIDENDS

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 10 % (ten per cent) of the gross amount of the dividends.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

3. The term “dividends” as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company’s undistributed profits to a tax on the company’s undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.

Article 11

INTEREST

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 10 % (ten per cent) of the gross amount of the interest.

3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from tax in that State, provided that it is derived and beneficially owned by:

(a) the Government, a political sub-division or a local authority of the other Contracting State; or

(b) (i) in the case of India:

(1) Reserve Bank of India;

(2) Export-Import Bank of India; and

(3) National Housing Bank;

(ii) in the case of the Republic of Indonesia:

(1) Bank Indonesia (the Central Bank of Indonesia);

(2) Pusat Investasi Pemerintah (the Centre for Government Investment); and

(3) Lembaga Pembiayaan Ekspor Indonesia (the Indonesia Eximbank); or

(c) a statutory body or any institution wholly owned by the Government of the Contracting States, as may be agreed from time to time between the competent authorities of the Contracting States;

4. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

6. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

7. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount of interest. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 12

ROYALTIES AND FEES FOR TECHNICAL SERVICES

1. Royalties or fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such royalties or fees for technical services may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed 10% (ten per cent) of the gross amount of the royalties or fees for technical services.

3. (a) The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

(b) The term “fees for technical services” as used in this Article means payments of any kind, other than those mentioned in Articles 14 and 15 of this Agreement as consideration for managerial or technical or consultancy services, including the provision of services of technical or other personnel.

4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

5. (a) Royalties and fees for technical services shall be deemed to arise in a Contracting State when the payer is that State itself, a political sub-division, a local authority, or a resident of that State. Where, however, the person paying the royalties or fees for technical services, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties or fees for technical services was incurred, and such royalties or fees for technical services are borne by such permanent establishment or fixed base, then such royalties or fees for technical services shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

(b) Where under sub-paragraph (a) royalties or fees for technical services do not arise in one of the Contracting States, and the royalties relate to the use of, or the right to use, the right or property, or the fees for technical services relate to services performed, in one of the Contracting States, the royalties or fees for technical services shall be deemed to arise in that Contracting State.

6. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the royalties or fees for technical services, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount of royalties. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

Article 13

CAPITAL GAINS

1. Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other State.

3. Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in that Contracting State in which the place of effective management of the enterprise is situated.

4. Gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State.

5. Gains from the alienation of shares other than those mentioned in paragraph 4 in a company which is a resident of a Contracting State may be taxed in that State.

6. Gains from the alienation of any property other than that referred to in paragraphs 1, 2, 3, 4 and 5 shall be taxable only in the Contracting State of which the alienator is a resident.

Article 14

INDEPENDENT PERSONAL SERVICES

1. Income derived by an individual who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State:

(a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case, only so much of the income as is attributable to that fixed base may be taxed in that other State; or

(b) if his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 91 days in any period of twelve months; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

2. The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, surgeons, dentists and accountants.

Article 15

DEPENDENT PERSONAL SERVICES

1. Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

Article 16

DIRECTORS’ FEES

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or similar organ of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17

ARTISTES AND SPORTS PERSONS

1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsperson, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

2. Where income in respect of personal activities exercised by an entertainer or a sportsperson in his capacity as such accrues not to the entertainer or sportsperson himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or sportsperson are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply to income from activities performed in a Contracting State by entertainers or sports persons if the activities are substantially supported by public funds of one or both of the Contracting States, a local authority or public institution thereof. In such a case, the income shall be taxable only in the Contracting State of which the entertainer or sportsperson is a resident.

Article 18

PENSIONS AND ANNUITY

1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid in consideration of past employment and annuity paid to a resident of a Contracting State shall be taxable only in that State.

2. The term “annuity” means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

Article 19

GOVERNMENT SERVICE

1. (a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State, or a political subdivision, or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority or body shall be taxable only in that State;

(b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

(i) is a national of that State, or

(ii) did not become a resident of that State solely for the purpose of rendering the services.

2. (a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

(b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that other State.

3. The provisions of Article 15, 16, 17, and 18 shall apply to salaries, wages and other similar remuneration, and to pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority body thereof.

Article 20

PROFESSORS, TEACHERS AND RESEARCH SCHOLARS

1. A professor, teacher or research scholars who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State for the purpose of teaching or engaging in research, or both, at a university, college, school, museum or other approved institution in that other Contracting State shall be exempt from tax in that other State on any remuneration for such teaching or research for a period not exceeding two years from the date of his first arrival in that other State.

2. This Article shall not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons.

3. For the purposes of this Article, an individual shall be deemed to be a resident of a Contracting State if he is resident in that Contracting State in the fiscal year of income in which he visits the other Contracting State or in the immediately preceding fiscal year of income.

4. For the purposes of paragraph 1, “approved institution” means an institution which has been approved in this regard by the competent authority of the concerned Contracting State.

Article 21

STUDENTS AND APPRENTICES

1. Payments which a student or apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

2. The benefits of this Article shall extend only for such period of time as may be reasonable or customarily required to complete the education or training undertaken, but in no event shall any individual have the benefits of this Article:

(i) in the case of student: for more than five consecutive years from the date of his first arrival for the purposes of his education in the Contracting State;

(ii) in the case of apprentice: for more than two consecutive years from the date of his first arrival for the purposes of his training in the Contracting State.

Article 22

OTHER INCOME

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State.

2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement and arising in the other Contracting State may also be taxed in that other State.

CHAPTER IV

METHODS FOR ELIMINATION OF DOUBLE TAXATION

Article 23

METHODS FOR ELIMINATION OF DOUBLE TAXATION

1. Where a resident of a Contracting State derives income which, in accordance with the provisions of this Agreement, may be taxed in the other Contracting State, the first-mentioned State shall allow as deduction from the tax on the income of that resident an amount equal to the income tax paid in that other State. Such deduction shall not, however, exceed the part of the income tax as computed before the deduction is given, which is attributable as the case may be, to the income which may be taxed in that other State.

2. Where in accordance with any provision of the Agreement, income derived by a resident of a Contracting State is exempt from tax in that State, that State may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income.

CHAPTER V

SPECIAL PROVISIONS

Article 24

LIMITATION OF BENEFITS

1. The provisions of this Agreement shall in no case prevent a Contracting State from the application of the provisions of its domestic law and measures concerning tax avoidance or evasion, whether or not described as such.

2. A resident of a Contracting State shall not be entitled to the benefits of this Agreement if its affairs were arranged in such a manner as if it was the main purpose or one of the main purposes to take the benefits of this Agreement.

3. The case of legal entities not having bonafide business activities shall be covered by the provisions of this Article.

Article 25

NON-DISCRIMINATION

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprise of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to resident of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents.

3. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to other similar enterprises of the first mentioned State are or may be subjected.

4. Except where the provisions of paragraph 1 of Article 9, paragraph 7 of Article 11, or paragraph 6 of Article 12 apply, interest, royalties and other disbursement paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State.

5. In this Article the term “taxation” means taxes which are the subject of this Agreement.

Article 26

MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 25, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Agreement.

2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Agreement. Any agreement reached shall be implemented notwithstanding any time-limits in the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement. They may also consult together for the elimination of double taxation in cases not provided for in the Agreement.

4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. The competent authorities, through consultations, shall develop appropriate bilateral procedures, conditions, methods and techniques for the implementation of the mutual agreement procedure provided for in this Article.

Article 27

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such information (including documents or certified copies of the documents) as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1 and 2

2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws and the administrative practice of that or of the other Contracting State;

(b) to supply information (including documents or certified copies of the documents) which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

4. If the information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3, but in no case shall such limitations be construed to permit a Contracting state to decline to supply information solely because it has no domestic interest in such information.

5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.

Article 28

ASSISTANCE IN COLLECTION

1. The Contracting States shall lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles 1 and 2. The competent authorities of the Contracting States may by mutual agreement settle the mode of application of this Article.

2. The term “revenue claim” as used in this Article means an amount owed in respect of taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs of collection or conservancy related to such amount.

3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the other Contracting State. That revenue claim shall be collected by that other State in accordance with the provisions of its laws applicable to the enforcement and collection of its own taxes as if the revenue claim were a revenue claim of that other State.

4. When a revenue claim of a Contracting State is a claim in respect of which that State may, under its law, take measures of conservancy with a view to ensure its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of taking measures of conservancy by the competent authority of the other Contracting State. That other State shall take measures of conservancy in respect of that revenue claim in accordance with the provisions of its laws as if the revenue claim were a revenue claim of that other State even if, at the time when such measures are applied, the revenue claim is not enforceable in the first-mentioned State or is owed by a person who has a right to prevent its collection.

5. Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 or 4 shall not, in that State, have any priority applicable to that revenue claim under the laws of the other Contracting State.

6. Proceedings with respect to the existence, validity or the amount of a revenue claim of a Contracting State shall only be brought before the courts or administrative bodies of that State. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State.

7. Where, at any time after a request has been made by a Contracting State under paragraph 3 or 4 and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the relevant revenue claim ceases to be

(a) in the case of a request under paragraph 3, a revenue claim of the first-mentioned State that is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, or

(b) in the case of a request under paragraph 4, a revenue claim of the first-mentioned State in respect of which that State may, under its laws, take measures of conservancy with a view to ensure its collection,

the competent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request.

8. In no case shall the provisions of this Article be construed so as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

(b) to carry out measures which would be contrary to public policy (ordre public);

(c) to provide assistance if the other Contracting State has not pursued all reasonable measures of collection or conservancy, as the case may be, available under its laws or administrative practice;

(d) to provide assistance in those cases where the administrative burden for that State is clearly disproportionate to the benefit to be derived by the other Contracting State.

Article 29

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the general rules of international law or under the provisions of special agreements.

CHAPTER VI

FINAL PROVISIONS

Article 30

ENTRY INTO FORCE

1. Each of the Contracting States shall notify the other Contracting State through diplomatic channels the completion of the procedures required by its law for the bringing into force of this Agreement.

2. This Agreement shall enter into force on the date of the later of the notifications referred to in paragraph 1 of this Article.

3. The provisions of this Agreement shall have effect as follows:

(a) In India, in respect of income derived in any fiscal year beginning on or after the first day of April next following the calendar year in which the Agreement enters into force.

(b) In Indonesia;

(i) in respect of taxes withheld at source: for amounts paid or credited on or after the first day of January next following the date on which this Agreement enters into force, and

(ii) in respect of other taxes: for any tax year commencing on or after the first day of January next following the date on which this Agreement enters into force.

4. The Agreement between the Government of the Republic of India and the Government of the Republic of Indonesia for the Avoidance of Double Taxation and Prevention of fiscal evasion with respect to taxes on income signed at Jakarta on the 7th August, 1987 shall cease to have effect when the provisions of this Agreement become effective in accordance with the provisions of paragraph 3 of this Article.

Article 31

TERMINATION

This Agreement shall remain in force indefinitely until terminated by one of the Contracting States. Either Contracting State may terminate the Agreement, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year beginning after the expiration of five years from the date of entry into force of the Agreement. In such event, the Agreement shall cease to have effect:

(a) In India, in respect of income derived in any fiscal year on or after the first day of April next following the calendar year in which the notice is given.

(b) In Indonesia;

(i) in respect of taxes withheld at source: for amount paid or credited on or after the first day of January in the calendar year immediately following that in which the notice of such termination is given, and

(ii) in respect of other taxes: for any tax year commencing on or after the first day of January in the calendar year immediately following that in which the notice of such termination is given.

In WITNESS WHEREOF, the undersigned, duly authorised thereto, have signed this Agreement.

Done at New Delhi the twenty-seventh day of July 2012 in two identical originals each in the Hindi, Bahasa Indonesia and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

For the Government of the Republic of India

(S. M. KRISHNA)

MINISTER FOR EXTERNAL AFFAIRS

For the Government of the Republic of Indonesia

(Dr. R. M. MARTY M. NATALEGAWA)

MINISTER FOR FOREIGN AFFAIRS

PROTOCOL

At the moment of signing the Agreement this day concluded between the Government of the Republic of India and the Government of the Republic of Indonesia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, the undersigned have agreed upon the following provisions which shall be an integral part of the Agreement.

1. With reference to paragraph 1 of Article 7 (Business Profits), it is understood that profits derived from the sale of goods or merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those effected, through that permanent establishment, may be considered attributable to that permanent establishment if it is proved that:

(i) this transaction has been resorted to in order to avoid taxation in the Contracting State where the permanent establishment is situated, and

(ii) the permanent establishment in any way was involved in this transaction.

2. It is understood that the provisions of paragraphs 1 and 2 of Articles 11 (Interest) and 12 (Royalties and Fees for Technical Services) shall not apply and provisions of Article 7 (Business Profits) shall apply if the income is effectively connected with business activities referred to in paragraph 1 of this Protocol.

3. Notwithstanding anything contained in this Agreement, it is understood that nothing shall prevent a Contracting State from charging the profits of a permanent establishment of an enterprise of the other Contracting State at a rate of tax which is higher than that imposed on the profits of a similar company of the first-mentioned State and it shall neither be construed as discriminatory with respect to Article 25 (Non-discrimination) nor as being in conflict with the provisions of paragraph 3 of Article 7 (Business Profits).

4. For purposes of Article 7 where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, the profits attributable to the permanent establishment may be subjected to an additional tax or branch profits tax in that other State in accordance with its law, but such tax so charged shall not exceed a rate of 15%(fifteen per cent).

5. It is understood that in the event of conflict in application between the provisions of this Agreement and the provisions of production sharing contracts relating to the exploitation and production of oil and natural gas in a Contracting State entered into by the Government or any person authorized by it, the latter shall prevail.

6. In respect of paragraph 2 of Article 27 (Exchange of Information), it is understood that, information received by a Contracting State may be used for other Government enforcement purposes when such information may be used for such other Government enforcement purposes under the laws of both States and the competent authority of the supplying State authorises such use.

In WITNESS WHEREOF, the undersigned, duly authorised thereto, have signed this Protocol.

Done at New Delhi the twenty-seventh day of July 2012 in two identical originals each in the Hindi, Bahasa Indonesia and English languages, all texts being equally authentic. In case of divergence of interpretation, the English text shall prevail.

For the Government of the Republic of India

(S. M. KRISHNA)

MINISTER FOR EXTERNAL AFFAIRS

For the Government of the Republic of Indonesia

(Dr. R. M. MARTY M. NATALEGAWA)

MINISTER FOR FOREIGN AFFAIRS

Notification No. : 15/2016 Dated: 16-03-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies Karnataka Urban Water Supply and Drainage Board a Board constituted under the Karnataka Urban Water Supply and Drainage Board Act, 1973 (Karnataka Act No. 25 of 1974), in respect of the following specified income arising to that Board – 15/2016 – Dated 16-3-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 15/2016

New Delhi, the 16th March, 2016

S.O. 1139(E).- In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the Karnataka Urban Water Supply and Drainage Board a Board constituted under the Karnataka Urban Water Supply and Drainage Board Act, 1973 (Karnataka Act No. 25 of 1974), in respect of the following specified income arising to that Board, namely:-

(a) Establishment, administrative and supervision charges collected as a percentage of project cost prescribed by the Karnataka Public Works Department Accounts Code of Government of Karnataka;

(b) Water charges collection for supply of water to local bodies and directly to consumers;

(c) Interest on investments and fixed deposit in banks;

(d) Rent collected for letting out head office building ‘JAL BHAWAN’;

(e) Forfeiture of earnest money deposit.

2. This notification shall be effective subject to the conditions that the Karnataka Urban Water Supply and Drainage Board -

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139of the Income-tax Act, 1961.

3. This notification shall be deemed to have been apply for the financial year 2014-2015 and shall apply with respect to the financial years 2015-2016, 2016-2017, 2017-2018 and 2018-2019.

[F. No. 196/6/2015-ITA-I]

DEEPSHIKHA SHARMA, Directo

Notification No. : 16/2016 Dated: 16-03-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies National Biodiversity Authority for dealing with specified income – 16/2016 – Dated 16-3-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 16/2016

New Delhi, the 16th March, 2016

S.O. 1138(E).-In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, “National Biodiversity Authority” an authority established under the Biological Diversity Act, 2002 (18 of 2003) in respect of the following specified income arising to that Authority, namely:-

(a) amount received in the form of grant-in-aid from the Government of India;

(b) amount received in the form of interest;

(c) benefit sharing fee and royalty received;

(d) amount received in the form of penalty and application fees.

2. This notification shall be effective subject to the following conditions, namely:-

(a) the National Biodiversity Authority shall not engage in any commercial activity;

(b) the activities and the nature of the specified income of the National Biodiversity Authority shall remain unchanged throughout the financial years; and

(c) the National Biodiversity Authority shall file return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the said Act.

3. This notification shall be deemed to apply for the period 01.06.2011 to 31.03.2012 and financial years 2012-13, 2013-14, 2014-15 and shall apply with respect to the financial year 2015-2016.

[F. No. 196/28/2012-ITA-I]

DEEPSHIKHA SHARMA, Director

F.NO.287/30/2014-IT (INV.II)-VOL-III – 16-3-2016


Uploading of Information Related to Penny Stock in Respect of Assessees – Circular – Dated 16-3-2016 – Income Tax

LETTER F.NO.287/30/2014-IT (INV.II)-VOL-III

DATED 16-3-2016

REF : EFS Instruction No.53 of Directorate of Systems dated 08.03.2016

Kind attention is invited to the above referred EFS Instruction issued by the System Directorate regarding handling cases of Penny Stocks (suspect Long Term Capital Gains/Short Term Capital Loss etc).

2. It is informed that the said instruction is in the context of investigation conducted by Kolkata Investigation Directorate in respect of large number of penny stock companies, whose share prices were artificially raised on the Stock Exchanges in order to book bogus claims of Long Term Capital Gains or Short Term Capital Loss by various beneficiaries. Extensive investigation, including search and seizure/survey action on entry providers, riggers, beneficiaries etc. was conducted by the Investigation Directorate in such cases. Based upon outcome of such investigation and analysis of the data, the Systems Directorate has now uploaded details of such information in respect of individual assessees who have made transactions in such penny stocks.

3. Vide EFS Instruction under reference a new button ‘Penny Stock’ has been added on Individual Transaction Screen (ITS) to display information related to penny stock, now enabled on the screen of the Assessing Officers (AOs). Available information regarding the manipulative transactions has been captured in the functionality, including the investigation report of the Kolkaia Investigation Directorate. The functionality also contains a guidance note for the Assessing Officers. Such details are visible to the AOs of those assessees whose particulars have emanated out of the investigation report of Kolkata Investigation Directorate and whose cases have been considered actionable, at this stage. The details are also visible to supervisory officers of such AOs.

4. In case of any difficulty in viewing the information on ITS, Shri Vipul Agarwal, JDIT (Sys) 2(1) could be contacted on 0120-2770052 or email at vipul.agarwal@nic.in

5. The undersigned is directed to request that necessary directions may kindly be issued to the officers working under your jurisdiction to access this functionality and ensure that information available in the ‘Penny Stock’ functionality which may be useful for the purpose of cases presently under scrutiny, is examined and considered while finalizing assessments and considering reopening of cases under section 148 of the IT Act, 1961.

6. This issues with the approval of Member (Inv), CBDT.

Real Estate Bill to be discussed in Lok Sabha : 16-03-2016


With just three working days left in the first half of the Budget session, the Centre will press for the passage of key bills in Parliament.

The Whistle Blowers Protection (Amendment) Bill, 2015 is listed for consideration and passing in today’s business in the Rajya Sabha whereas, in Lok Sabha, the Real Estate (Regulation and Development) Bill would be discussed.

The first half of the session is concluding on Wednesday, and will resume on April 25 after a recess of over one month.

The Real Estate Bill was passed by the Rajya Sabha last week. The ruling dispensation at the Centre would be keen to see that the Real Estate Bill gets the nod of the lower house and Aadhar Bill, which is passed by the Lok Sabha, gets passed in the upper house.

The Real Estate Bill would face no hurdle in the lower house in view of majority of the ruling NDA.

With regard to Aadhar Bill, it is certain to sail through as, being a Money Bill, the upper house has to return it within a duration of 14 days.

The Rajya Sabha will resume discussion on the Rail Budget whereas the Lok Sabha on General Budget along with appropriation bills on Monday.

Source : PTI

EPF tax rollback: Winning the tax battle, but losing the returns war : 16-03-2016


You should have your own retirement savings plan in place by way of simple, steady investing in high-yielding asset classes whose returns will ensure taxes, regulations and regulators matter little over the long term.

You might rejoice now at the withdrawal of the Budget’s 2016-17 proposal to tax employees provident fund (EPF) on maturity. But it may not please you when I say that you may have won the tax battle but run the risk of losing the returns war. Lower contribution (since you mostly invest only to save taxes) and lower returns from the traditional options of provident fund may leave you with a much lower corpus than you ought to have.

Let us look at the entire issue from the perspective of what the government is seeking to achieve and what it means to you.

The current and previous ruling governments have tried various means to get EPFO (Employees’ Provident Fund Organisation) as well as investors themselves to adapt a bit to market-linked investing.

– One, it had asked the EPFO to invest a portion (15-20%) of their corpus in equities (index-linked). This did not yield much result but finally a measly 5% of the incremental corpus was agreed to be invested. Hardly a proportion to yield any results for the investor or for the government to reduce its burden from ‘subsidised’ rates.

– Two, one of its other market-linked products, NPS, did not have much corporate takers. In Budget 2015, the government stated that it will look at eventually making an employee choose between either EPF or National Pension System (NPS).

– Three, in a significant move, it changed the way interest rates would be set for small-savings schemes and said rates would be reset every quarter. That means your balance in EPF or PPF can earn different rates every quarter and in the current falling rate scenario, that means your returns will simply move southward, forcing you to move to better yielding options.

– Four, the Economic Survey this year, too has noted how a chunk of ‘wealthy’ investors are the ones to take maximum advantage of benefits in small-savings schemes including provident funds and the need to at best postpone taxability and not entirely exempt it (move to EET).

In all this, the message is clear. One, the government want small savings to belong to genuinely small investors and not those seeking tax haven and safety besides good returns.

Two, the government does not intend to continue its ‘subsidy’ raj in the interest rates and would at least like part of it to be linked to market forces. Paying just 25 basis points more than gilt securities for PPF/EPF is a clear indication.

Three, with deepening gilt market, the government has enough ways to raise resources than to depend on public money. It does not need local players alone to buy its bonds; there are FIIs in hoards, now.

The budget proposal (before rollback), although harsh, was trying to convey that investors need to broad-base their investments. They need to change their attitude towards investing.

As those who have observed the government instruments rates will agree, interest rates, whether in EPF, PPF or other government schemes have clearly been on a downward trend post the late 1990s. There is no way we will go back to the period of 12% returns.

All this means, the government needs you and you need to move to market-linked instruments that deliver superior returns, rather than getting stuck with the idea of saving taxes (at all costs) alone. Just as the government cannot bear the cost of providing for an aging population, you will yourself find it hard to fend for your needs with higher cost of living and lower returns.

By trying to place EPF and NPS on an even footing, the government wanted to send across the message that now, investors have to look for superior returning products and not just tax-saving product.

Unfortunately, the move was too sweeping and less thought out to be accepted. Here’s the trouble with the Budget proposals.

As a result of the rollback, NPS continues to remain a weak option, despite the 40% exemption on withdrawal (as up to 20% will still be taxed out of the 60% allowed to be withdrawn). On the other hand, EPF and PPF will continue to swell, with investors unaware that they may be among the mediocre returning options, given that the rates are set to be more dynamic.

If the intention of the government was to force people into properly channelising the lump-sum they receive on retirement into products that give out regular income, then it could simply have demanded proof of such income-generating investment to avoid tax on withdrawal. Any withdrawal, before retirement, must be taxed to deter investors from pulling out their entire corpus.

Pension plans, which are low yielding, should not be the only option when it comes to parking such proceeds. Why not give an array of schemes – including options such as Post Office Senior Citizens’ Scheme or for that matter low-risk mutual funds and government bonds to ensure investors create their own ‘income’ stream?

Unfortunately, this did not happen in the recent Budget. However, the road-map laid thus far is pointing to only one direction: a move towards market-linked products if you are saving for retirement. This may yet reappear in a new avatar for all you know. And it’s better for you if they do.

So what should you do as an investor? Looking up to the Government to pay you inflation-beating returns, looking up to the tax authorities to exempt all such income and looking up to the employer to contribute to your retirement kitty (which is the latest proposal; that employer will contribute more to pension) are all variables that are not within your control – as far as building wealth is concerned.

A move here or a move there can send your financial goals for a toss. This is one of the biggest reasons why you should have your own retirement savings plan in place by way of simple, steady investing in high-yielding asset classes whose returns will ensure taxes, regulations and regulators matter little over the long term. For what remains at the end, from investing regularly in such asset class, is wealth alone.

Source : The Financial Express

Budget 2016: How FM Arun Jaitley is attempting to raise rural incomes to revive demand and growth : 16-03-2016


Officials in the ministry of rural development are a happy lot these days. Finance minister Arun Jaitley agreed to practically every demand they made during Budget discussions.

Even the prime minister sat through some detailed presentations, according to a senior ministry official. The result: rural development and agriculture have been the central theme of Jaitley’s budget for 2016-17.

India, into the 70th year of Independence, still struggles to provide basic necessities to all its citizens. More than 70 per cent of its 120 crore population still lives in villages, many of them unconnected by roads, electricity or communications networks. In the Socio Economic and Caste Census (SECC) 2011, about half of the nearly 18 crore rural households reported one or more deprivations such as homelessness, landlessness or being without a literate adult in their families.

More than half the working population in rural areas toiled as casual labour and 30 per cent depended on farming. The highest earner in more than three-fourths of rural households made less than Rs 5,000 a month. Widening fiscal deficit has been keeping government spending on a tight leash. Its expenditure as a percentage of the GDP, a key factor in boosting growth, has fallen from 15.8 per cent in 2009-10 to 13 per cent in 2015-16. Budget numbers show that it will be marginally lower at 12.9  per cent this year. Growth in taxes could have given the government more headroom, but India’s tax-GDP ratio is at 16.7 per cent. In comparison, China’s is 19.4 per cent and the US’ is 25.4 per cent, according to the Heritage Foundation’s 2016 Index of Economic Freedom.

To make matters worse, farmers are struggling. While agriculture’s share in output fell from 28.3 per cent in 1993-94 to 14.4 per cent in 2011-12, its employment share declined from 64.8 per cent to 48.9 per cent  over the same period, according to a 2015 paper by NITI Aayog, the think-tank successor of the Planning Commission.

After nearly two years of trying to drive private investment in manufacturing and services, the government returned to tend to rural India, the battered core of the economy that accounts for much of economic demand.

Brushing off earlier misgivings, the finance minister has committed to fund welfare programmes started by the previous government such as the rural job guarantee scheme, village roads building and cheap crop insurance.

The budget measures, Jaitley hoped, would create assets in rural areas and help double farm income in five years. It would take careful planning, technological fixes and capacity building at the grassroots to realise the ambitious target.

While the rural jobs scheme—the Mahatma Gandhi National Employment Guarantee Scheme (MGNREGS)—has been in operation for a decade, it is still plagued by leakages and poor asset creation. In contrast, the rural road building programme, or Pradhan Mantri Gram Sadak Yojana (PMGSY), mandated to construct all-weather roads connecting hitherto unconnected villages and hamlets is doing reasonably well. The project has added lakhs of kilometres of roads, helping farmers to cart their produce to markets  and making government services such as education and healthcare slightly more accessible to those living in far-flung areas.

A senior official in the ministry of rural development says the ministry’s focus would be to target “multi-dimensional poverty” as revealed by the SECC 2011. “Now we have data and we can design our interventions accordingly,” he says.

So the government is on Mission Antyodaya, a participatory planning exercise that began last October 2. The idea is to use various schemes such as MGNREGS, national Rural Livelihood Mission, the Deen Dayal Upadhyaya Grameen Kaushalya Yojana, National Social Assistance Programme and the Indira Aawaas Yojana in an integrated manner to alleviate poverty and raise incomes.

Source : The Economic Times

Notification No. : 14/2016 Dated: 15-03-2016


Income-tax (5th Amendment) Rules, 2016) – Rules in respect of offshore fund manager regime under section 9A of the Income-tax Act, 1961 – 14/2016 – Dated 15-3-2016 – Income Tax

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

(CENTRAL BOARD OF DIRECT TAXES)

(INCOME – TAX)

Notification

New Delhi, the 15th March, 2016

S.O. 1101(E).- In exercise of the powers conferred by section 9A read with section 295 of the Income-tax Act, 1961(43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend theIncome-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (5th Amendment) Rules, 2016.

(2) They shall come into force from the date of their publication in the Official Gazette.

2. In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), after rule 10UC the following rules shall be inserted, namely:-

“10V. Guidelines for application of section 9A.-(1) Where the investment in the fund has been made directly by an institutional entity, the number of members and the participation interest in the fund shall be determined by looking through the said entity, if it, -

(a) independently satisfies the conditions mentioned in clauses (c), (e), (f) and (g) of sub-section (3) of section 9A;

(b) has been setup solely for the purpose of pooling funds and investment thereof; and

(c) is resident of a country or specified territory with which an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A has been entered into.

(2) For the purposes of clause (c) of sub-section (3) of section 9A, where direct investor in the fund is a person other than a natural person, the fund shall undertake appropriate due diligence to ascertain the indirect participation, if any, of a person resident in India and the extent thereof:

Provided that where such direct investor is, the Government or the Central bank or a sovereign fund or a multilateral agency or appropriately regulated investor in the form of pension fund or University fund or a bank or collective investment vehicles such as mutual funds, the fund shall obtain a declaration in writing from the direct investor regarding the participation, if any, of a person resident in India and the indirect participation in the fund of any person resident in India may be determined by the fund on the basis of such declaration.

Explanation.– For the purposes of this sub-rule an investor shall be considered to be appropriately regulated if it is regulated or supervised by the securities market regulator or the banking regulator of the country outside India of which it is resident, in the same capacity in which it has made investment in the fund.

(3) A fund shall not be denied the benefit of being an eligible fund for the purposes of section 9A, if, -

(a) non-fulfilment of any of the conditions specified in clauses (c), (d) and (e) of sub-section (3) of section 9A, -

(i) is for the reasons beyond the control of the fund and it does not exceed a period of ninety days;

(ii) does not exceed a period of eighteen months beginning from the date on which the fund is setup or is not beyond the final closing of the fund, whichever is earlier, and bonafide efforts are made to satisfy the conditions specified in the clauses (c), (d) and(e) of sub-section (3) of section 9A;

(iii) is for the reason that the fund is in the process of being wound up and it does not exceed a period of one year beginning from the date on which the process of winding has begun; or

(b) there is delay in furnishing the statement referred to in sub-section (5) of section 9A and such delay does not exceed a period of ninety days.

(4) For the purposes of clause (k) of sub-section (3) of section 9A, a fund shall be said to be controlling or managing a business carried out by any entity, if the fund directly or indirectly holds such rights in, or in relation to, the entity, which results in the fund holding the share capital or a voting power or an interest exceeding twenty six per cent. of the total share capital of, or as the case may be, total voting power or total interest in, the entity.

(5) Subject to the provisions of sub- rules (6), (7) and (8), for the purposes of determining the arm’s length price in respect of any remuneration, paid by the eligible investment fund to an eligible fund manager, referred to in clause (m) of sub-section (3) of section 9A, the provisions of the Act shall apply as if,-

(i) the transaction between the eligible investment fund and the eligible fund manager is an international transaction; and

(ii) the eligible investment fund and the eligible fund manager are associated enterprises.

(6) The fund manager shall keep and maintain information and documents as required under section 92D and the rules made thereunder.

(7) The fund manager shall, in addition to any report required to be furnished by it under section 92E, obtain a report from the accountant in respect of activity undertaken for the fund and furnish such report on or before the specified date in the Form No. 3CEJ duly verified by such accountant in the manner indicated therein and all the provisions of the Act shall apply as if it is a report to be furnished under section 92E.

Explanation.- For the purposes of this sub-rule “specified date” shall have the same meaning as assigned to “due date” in the Explanation 2 below sub-section (1) of section 139.

(8) Where the fund manager has either not maintained the document or information as required under section 92Dand the rules made thereunder or not produced the document or information before the Assessing Officer or the Transfer Pricing Officer, as the case may be, then, the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall, before determining the arm’s length price for the purposes of clause (m) of sub-section (3) of section 9A, provide an opportunity to the fund to produce the information and documents necessary for the determination of the arm’s length price and the arm’s length price shall be determined after considering the documents or information, if any, provided by the fund.

(9) If in any previous year, it is determined that the remuneration paid or payable by a fund to the fund manager is not in accordance with the provisions of clause (m) of sub-section (3) of section 9A, then the benefits of section 9Ashall not be denied to the fund which otherwise satisfies all other conditions specified in section 9A.

(10) Nothing contained in sub-rule (9) shall apply to a fund if the remuneration paid or payable by the fund to the fund manager has been determined to be not at arm’s length price, -

(a) for a period of three previous years in succession; or

(b) for any three out of the preceding four previous years.

10VA. Approval of the fund.- (1) An investment fund may at its option seek approval of the Board regarding its eligibility for the purposes of section 9A.

(2) The fund seeking approval may make an application in writing, enclosing relevant documents and evidence, to Member (Income-tax), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, North Block, New Delhi.

(3) The application under sub-rule (2) shall be made three months before the beginning of the previous year for which the fund seeks the approval.

(4) A committee as notified by the Board, shall examine the application and submit its recommendations regarding grant of approval or otherwise and the conditions, if any, subject to which such an approval is to be granted.

(5) The committee referred to in sub-rule(4) shall be headed by a Principal Chief Commissioner or Chief Commissioner, as the case may be, and consist of two other Income-tax authorities not below the rank of Commissioner.

(6) The committee on behalf of the Board may, before giving its recommendation, call for such documents or information from the investment fund as it may consider necessary and may call for further details or information from the fund as well as from the Income-tax authorities and other Departments or agencies, as it may deem fit.

(7) The Board, on the basis of the recommendations of the committee, shall, within sixty days from the end of the month in which the application under sub-rule (2) has been made,-

(i) by an order in writing, grant approval to the fund subject to such conditions as it may deem fit; or

(ii) for reasons to be recorded in writing, reject the application.

(8) The approval once granted, subject to any condition specified in this behalf, shall be applicable for the previous year referred to in sub-rule(3) and subsequent previous years unless it is withdrawn by the Board.

(9) The benefit of section 9A shall not be denied to an eligible investment fund, which has been granted approval, for any previous year for which the approval is in force and has not been withdrawn.

(10) The Board may withdraw the approval granted to any fund, if it is satisfied that, -

(a) the approval has been obtained on the basis of misrepresentation of facts or fraud ;or

(b) the conditions mentioned in section 9A are not fulfilled; or

(c) any condition subject to which approval was granted, has been violated.

(11) No order rejecting the application or withdrawing the approval, shall be passed without giving an opportunity of being heard.

(12) A copy of the order rejecting the application or withdrawing the approval shall be communicated to the fund as well as the Assessing Officer and the Principal Commissioner or Commissioner having jurisdiction over the fund.

10VB. Statement to be furnished by the fund.- (1) The statement required to be furnished under sub-section (5) of section 9A shall be furnished for every financial year by the eligible investment fund in Form No.3CEK duly verified in the manner indicated therein, to the Assessing Officer who has the jurisdiction over the fund or would have had the jurisdiction had such fund been assessable to tax in India but for the provision of section 9A.

(2) The annual statement referred to in sub-rule (1) shall be furnished electronically under digital signature.

(3) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing of annual statement in the manner specified in sub-rule (2).”

2. In Appendix II to the said rules, after Form No. 3CEH, the following Forms shall be inserted, namely:-

Excise on jewellery to stay, but finance ministry ready to ease rules : 15-03-2016


The finance ministry has ruled out rolling back excise dutyon jewellery, but has shown preparedness to solve real issues of jewellery industry regarding implementation of excise duty.

The ministry has told the president of India Bullion andJewellers Association (IBJA) that we are ready to sit and discuss the solution, where jewelers can be benefitted and no harassment is done to them, an IBJA official said. The ministry added that it was ready to amend the rules where jewelers were not harmed.

The IBJA will soon be calling a meeting to discuss the issue further.

An excise duty of 1% was proposed in the Union Budget, opposing which all Indian jewelers were on strike from March 1. The IBJA, however, has stated that the indefinite strike will continue till the excise was completely withdrawn.

Source : PTI

Notification No. S.O. 1218 (E) 15-3-2016


Set up a Sector Specific Special Economic Zone for information technology and information technology enabled services at Navi Mumbai – S.O. 1218 (E) – Dated 15-3-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 15th March, 2016

S. O. 1218(E).- WHEREAS, M/s. Loma IT Park Developers Private Limited has proposed under section 3 of theSpecial Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a Sector Specific Special Economic Zone for information technology and information technology enabled services at Plot G-4/1, TTC Industrial Area, village- Ghansoli, Navi Mumbai, in the State of Maharashtra;

AND, WHEREAS, the Central Government is satisfied that requirements under sub-section (8) of section 3 of the said Act, and other related requirements are fulfilled and it has granted letter of approval under sub-section (10) of section 3 of the said Act for development, operation and maintenance of the above sector specific Special Economic Zone on 11th January, 2016;

NOW, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4of the Special Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, hereby notifies the 6.5 hectares area at above location with survey numbers given in the table below as a Special Economic Zone, namely:

TABLE

S. No.

Name of Village

Khasara No.

Area (in hectares)

1

Ghansoli

556P

0.277

2

557P

0.21

3

592P

1.35

4

593P

0.30

5

595P

0.12

6

599P

0.40

7

600P

0.15

8

601

0.05

9

602

0.76

10

603

0.72

11

604P

0.10

12

612P

1.57

13

613P

0.54

14

614P

0.002

15

620P

0.010

Total

6.5

AND, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (1) of section 13of the Special Economic Zones Act, 2005 (28 of 2005), hereby constitutes a Committee to be called the Approval Committee for the above Special Economic Zone for the purposes of section 14 of the said Act consisting of the following Chairperson and Members, namely:-

1.

Development Commissioner of the Special Economic Zone Chairperson ex officio;

2.

Director or Deputy Secretary to the Government of India, Ministry of Commerce and Industry, Department of Commerce or his nominee not below the rank of Under Secretary to the Government of India Member ex officio;

3.

Zonal Joint Director General of Foreign Trade having territorial jurisdiction over the Special Economic Zone Member ex officio;

4.

Commissioner of Customs or Central Excise having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;

5.

Commissioner of Income Tax having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;

6.

Director (Banking) in the Ministry of Finance, Banking Division, Government of India Member ex officio;

7.

Two officers, not below the rank of Joint Secretary, to be nominated by the State Government Member ex officio;

8.

Representative of the Developer of the zone Special invitee

AND, THEREFORE, the Central Government, in exercise of the powers conferred by sub-section (2) of section 53of the Special Economic Zones Act, 2005 (28 of 2005), hereby appoints the 15th day of March, 2016 as the date from which the above Special Economic Zone shall be deemed to be Inland Container Depot under section 7 of theCustoms Act, 1962 (52 of 1962).

[F. No. F.1/1/2016-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

After Uttarakhand, Bihar, Assam, many more states planning levy on ecommerce goods : 15-03-2016


NEW DELHI: Ecommerce players are crying foul as several states start imposing entry tax on goods purchased online, which the industry alleges is ‘discriminatory’ and even ‘unconstitutional’.

Uttarakhand, Bihar and Assam have already imposed an entry tax — a tax states impose on goods coming in from another state — on goods purchased online. Almost half-a-dozen other states, including Gujarat, Madhya Pradesh and Rajasthan, are considering a similar levy.

Ecommerce companies have alleged that this levy, which is imposed on the courier agent delivering the goods, leads to substantial increase in prices of goods sold online since it amounts to double taxation, and said they are mulling judicial remedy individually as well as collectively.

An industry official said entry tax is erroneously being applied on ecommerce firms and that states were looking for easy ways of garnering revenues even as the goods & services tax ( GST) is being  delayed. “The decision to impose such a levy without any ostensible justification seems not to be driven by clean hands. The governments seem to be catering to various retail lobbies, which failed to stop ecommerce otherwise,” the official said, seeking anonymity.

Sudhanshu Gupta, vice-president (business) at Paytm, said, “What’s the point of the entire ‘Make in India’ if you can’t sell without barriers to all the people in India?”

He said these kind of levies act as a major deterrent for sellers from different parts of the country who have been traditionally supplying to showrooms in the state and are now selling directly to consumers.

Subho Ray, president of the Internet & Mobile Association of India, said, “The practice smacks of some kind of predatory tax regime which is being promoted by some states.” ET had reported on Monday that Flipkart has sued Uttarakhand for its decision to impose a 10% entry tax on goods purchased through ecommerce.

The country’s top etailer, which called the levy “discriminatory”, has filed the writ through its in-house logistics arm Ekart Logistics in the high court of Uttarakhand in Nainital. The matter is likely to be heard later this week.

Goldman Sachs has projected that India’s online retailing market, which is already one of the largest in the world, will expand to $69 billion in 2020 from $23 billion in 2016. Over the past month or so, entry tax on ecommerce purchases found mention in the Budget speeches of Gujarat, Madhya Pradesh and Rajasthan. Madhya Pradesh Finance Minister Jayant Malaiya in his Budget speech said the government wishes to impose an entry tax of 6% on goods purchased online to compensate for the loss due to ecommerce. It is estimated that 20-30% of the state’s commerce has shifted online.

Similarly, Gujarat Finance Minister Saurabh Patel proposed a levy on ecommerce transactions where goods are so sourced from outside the state.

“Trade of dealers of the state is affected adversely as also the state suffers loss of tax revenue due to sale of goods through supplies in the state from outside the state under ecommerce transactions. By capturing such transactions under the entry tax, the dealers of the state would get level playing field,” he said in his Budget speech.

Source : The Economic Times

Service tax levy on spectrum to increase call, data tariff rates: COAI : 14-03-2016


Industry body COAI today said the proposal in Finance Bill 2016 to declare spectrum allocations as services will result in a tax burden of Rs 77,000 crore for operators and is likely to hurt consumers as they have to pay higher tariff rates if the load passed on to them.

The Cellular Operators Association of India (COAI) further said this will also have an adverse impact on the government’s ‘Digital India’ initiative and financial inclusion plan.

“The service tax levy on spectrum assignment means that during auctions lined up for June-July, where reserve price is around Rs 5.36 lakh crore, the industry will have to cough up minimum Rs 77,000 crore as a service tax. This is a substantial financial burden on the industry which is reeling under debt,” the COAI said in a statement.

The Finance Bill 2016 has proposed that assignment of spectrum and subsequent transfer thereof to be declared as a services under Section 66E of the Finance Act, 1994.

It has said that all government services have been made liable to service tax and to be paid by the recipient on a reverse charge basis with effect from April 1, 2016.

“If the costs were to be passed on to the end consumer, it would not only result in a significant increase in the cost of telephone services, but also have an adverse impact on the Digital India initiative, as well as, the financial inclusion plan of the government,” the COAI said.

Further, the government has proposed that the Cenvat Credit of the tax so imposed on such assignment is proposed to be deferred over the life of the licence period.

The COAI said deferral of credits will mean that the industry will be burdened by a minimum effective cost of Rs 40,000-50,000 crore.

“It is worth noting that what is meant to be a ‘zero cost’ in the cenvat credit system for any operator who has adequate output service tax, will convert up to a 71 per cent cost of the tax imposed. The cost on account of deferral of credit would severely impact the health of the telecom industry,” the industry body said.

Credits of service tax imposed in respect of received services are available immediately on receipt of invoice or payments for services. Even in case of capital goods, benefit of credit is available within an average period of six months, over two financial years, the COAI said.

While requesting the government to reconsider tax proposal impacting the industry, the COAI has also sought clarification on proposed income tax provisions.

The Finance Bill, 2016 proposes to insert Section 35 ABA in the Income tax Act, 1961 (the Act). The said section prescribes that a deduction from income would be granted of an appropriate fraction of the expenditure incurred on acquiring the right to use spectrum and for which payment has actually been made.

A telecom operator bidding for spectrum can upfront pay for the spectrum acquired. The government also has a facility whereby the acquisition bid amount can be paid in installments over a prescribed period along with prescribed interest. This installment facility is given primarily to mitigate the financial burden on telecom operators who are already reeling under a huge debt burden.

“Section 35 ABA of the Act can be mis-interpreted that deduction is to be allowed (from taxable income) only of an appropriate fraction of installments paid and not of the actual bid amount incurred while acquisition of the spectrum.

“Such an interpretation will lead to penalising telecom operators who opt for installment schemes by deferring deduction vis a vis where bid amounts are paid upfront to the government,” the COAI said.

The industry body said the government should clarify on the income tax deduction proposals to mitigate ambiguity that could result in fruitless litigation and increased uncertainty.

Source : PTI

GST Bill might be passed in April: FM : 14-03-2016


Arun Jaitley also expressed hope the bankruptcy and insolvency Bill would be passed in the second half of the Budget session.

Finance Minister Arun Jaitley on Sunday said he was hopeful that the much-delayed Constitution amendment Bill on goods and services tax (GST) would be passed in the second half of Parliament’s Budget session, in April.

He also expressed hope for the bankruptcy and insolvency Bill.

In the first half of the Budget session, the key Aadhaar andReal Estate Regulation Bills were passed.

Jaitley said the GST and bankruptcy Bills would give a major push to India’s reform process, in an otherwise weak global economic weather.

“The current session of Parliament has already seen a landmark legislation passed two days ago. And I do hope to see another two being passed in the second part of the session,” he said at the end of the three-day Advancing Asia Conference, co-hosted by India and the International Monetary Fund.

The GST and bankruptcy Bills are among key reforms for India, the progress of which is being keenly watched by the global investors.

The constitution amendment Bill for GST has already been passed by the Lok Sabha and is pending ratification by the Rajya Sabha, where the ruling National Democratic Alliance does not have a majority. After it is approved by the Rajya Sabha, the legislation needs to be ratified by at least half the 29 states.

The second half of the Budget session will begin on April 20.

Once the bankruptcy and insolvency Bills is approved, Jaitley said, “It will give a major fillip or push to our reform process.”

Exhibiting determination to move on the reform path, India can provide a significant growth to the world, he said.

The GST Bill is proposed to usher in a unified indirect tax regime, which will subsume various taxes like excise, service tax, value added tax, sales tax, and octroi, at both the state and the Centre levels.

“We are trying to have special emphasis now, both in terms of legislative changes and resources being put to strengthen the banking system. I do feel the next few months are going to be extremely important in bringing about structural change,” the minister said. Stating India has its own share of problems, Jaitley said there was increased determination in the country to face the challenges and accelerate the pace of reforms, so as to continue to grow.

“Our growth model is based on concerns to eradicate poverty,” he said.

Source : Business Standard

F.NO.275/29/2014-IT(B) – 11-3-2016


U/s 199 of Income Tax Act 1961 – Recovery Of Demand Against Deductee Assessee – Circular – Dated 11-3-2016 – Income Tax

OFFICE MEMORANDUM

DATED 11-3-2016

Vide letter of even number dated 1-6-2015, the Board had issued directions to the field officers that in case of an assessee whose tax has been deducted at source but not deposited to the Government’s account by the deductor, the deductee assessee shall not be called upon to pay the demand to the extent tax has been deducted from his income. It was further specified that section 205 of the Income-tax Act, 1961 puts a bar on direct demand against the assessee in such cases and the demand on account of tax credit mismatch in such situations cannot be enforced coercively.

2. However, instances have come to the notice of the Board that these directions are not being strictly followed by the field officers.

3. In view of the above, the Board hereby reiterates the instructions contained in its letter dated 1-6-2015 and directs the assessing officers not to enforce demands created on account of mismatch of credit due to non-payment of TDS amount to the credit of the Government by the deductor. These instructions may be brought to the notice of all assessing officers in your Region for compliance.

This issues with the approval of Member (Revenue &TPS).

[F.NO.275/29/2014-IT(B)]

Law taxing out-of-State vehicles unconstitutional: High Court : 11-03-2016


n a huge relief to owners of non-Karnataka registered private vehicles, the Karnataka High Court on Thursday declared as “unconstitutional” the new law that compelled them to pay lifetime tax if they use such vehicles in Karnataka beyond 30 days.

 

Justice Anand Byrareddy delivered the verdict while allowing petitions filed by Jagadev Biradar of Pune in Maharashtra and others from neighbouring States, who questioned actions of the State transport authorities in impounding their vehicles and demanding payment of lifetime tax as per the new law enacted in 2014.

 

With this order, the non-Karnataka registered vehicles can be used in the State for 12 months without paying lifetime tax in Karnataka but such vehicles will have to be re-registered in Karnataka along with requisite lifetime tax if such vehicles are used beyond 12 months.

 

“The Explanation-2 to Section 3 of Karnataka Motor Vehicles Taxation Act, 1957 as inserted in KMVT (Amendment) Act, 2014 is unconstitutional and ultra vires,” the court declared, while also quashing the notices issued to the petitioners by the Regional Transport Offices asking them to pay lifetime tax on their vehicles registered outside Karnataka.

Source : Business Standard

Labour Ministry to oppose EPF tax in any form : 11-03-2016


A proposal from the finance ministry to tax the Employees Provident Fund in some new form came up in a meeting with the Prime Minister’s Office (PMO) but there was no agreement on a threshold over which it should apply.

The labour ministry said it would again oppose any such proposal, due to staunch opposition from labour unions. It was a meeting of officials from the labour and finance ministries with the PMO that had drawn curtains on the Budget proposal on an EPF tax.

According to current norms of the EPF Organisation, a private sector employee earning less than Rs 15,000 a month has to contribute 12 per cent of his salary towards the fund, matched by equal contribution from the employer. While 3.6 percentage points of his equivalent employer contribution goes towards the EPF, the rest goes for the Employee Pension Scheme (EPS).

The proposal was that the same pattern follows in the case of those earning over Rs 15,000 a month. This would have allowed a higher share flowing to the pension scheme. And, allowed the amount to be taxed at withdrawal, as income from pension is taxable.

“Yes, there was such a proposal but we had rejected it in the (PMO) meeting itself… a person earning more than Rs 15,000 cannot be termed as a better-off Indian,” said a senior official, who was present at the meeting.

Labour ministry officials said they’d again oppose the proposal if it comes.

“Many people who are in the bracket of Rs 15,000-20,000 might move from a large firm to a smaller one or lose the job before five years. Why will they see a higher portion of their income being taxed?” asked an official.

In his Budget speech, Finance Minister Arun Jaitley had first proposed taxing withdrawal beyond 40 per cent of the EPF corpus. Later, finance ministry officials said this would affect only people earning only above Rs 15,000 a month, about seven million of the 37 million subscribers of the scheme. It was then decided to entirely withdraw it, under pressure from trade unions and Opposition parties.

Source : PTI

Notification No. F. No. 01/04/2013 CL-V(Part-II) 10-3-2016


The Companies (Share Capital and Debentures) Amendment Rules, 2016 – F. No. 01/04/2013 CL-V(Part-II) – Dated 10-3-2016 – Companies Law

Government of India

MINISTRY OF CORPORATE AFFAIRS

Notification

New Delhi, 10th March, 2016

G.S.R. 290 (E).- In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Share Capital and Debentures) Rules, 2014, namely: -

1.    (1) These rules may be called the Companies (Share Capital and Debentures) Amendment Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2.  In the Companies (Share Capital and Debentures) Rules, 2014, in rule 17, in sub-rule (1), in clause (n), after sub-clause (iii), the following proviso shall be inserted, namely:-

“Provided that where the audited accounts are more than six months old, the calculations with reference to buy back shall be on the basis of un-audited accounts not older than six months from the date of offer document which are subjected to limited review by the auditors of the company.”.

[F. No. 01/04/2013 CL-V(Part-II)]

(Amardeep Singh Bhatia)

Joint Secretary to the Government of India

Note:- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i) vide number G.S.R. 265(E), dated 31st  March, 2014 and subsequently amended vide notifications as detailed below:-

SI. No

Notification number Date

1

G.S.R. 413 (E) 18.06.2014

2

G.S.R. 210 (E) 18.03.2015

3

G.S.R. 439 (E) 29.05.2015

4

G.S.R. 841 (E) 06.11.2015

Notification No. F. No. 01/04/2013 CL-V (Pt-II) 10-3-2016


Central Government notifies Non-Banking Finance Institution activities and Housing Finance activities debt to capital and free reserves ratio shall be 6 1 for government companies – F. No. 01/04/2013 CL-V (Pt-II) – Dated 10-3-2016 – Companies Law

Government of India

Ministry of Corporate Affairs

Order

New Delhi, 10th March, 2016

S.O. 702(E).- In exercise of the powers conferred under the proviso to clause (d) of sub-section (2) of section 68 of the Companies Act, 2013 (18 of 2013) (Act), the Central Government hereby notifies that the debt to capital and free reserves ratio shall be 6:1 for government companies within the meaning of clause (45) of section 2 of theCompanies Act, 2013 which carry on Non-Banking Finance Institution activities and Housing Finance activities.

[F. No. 01/04/2013 CL-V (Pt-II)]

(Amardeep Singh Bhatia)

Joint Secretary to the Government of India

F.NO.DGIT(S)/DIT(S)-3/AST/PIL MATTER/AGRICULTURAL INCOME/97/2015-16 – 10-3-2016


Verification of Genuineness of Agricultural Income Shown In Income Tax Return by Assessees for Assessment Years 2011-12 to 2013-14 – Circular – Dated 10-3-2016 – Income Tax

LETTER F.NO.DGIT(S)/DIT(S)-3/AST/PIL MATTER/AGRICULTURAL INCOME/97/2015-16

DATED 10-3-2016

Kindly refer to subject matter.

2. It has been noticed that several assesses have declared income from agriculture of more than ₹ 1 Crore in the income tax return filed for earlier years especially from AYs. 2011-12 to 2013-14.

3. In this regard, there is a PIL matter pending before Hon’ble Patna High Court wherein concerns have been raised that a few assesses may be engaged in routing their unaccounted/illegal money in the garb of agricultural income thereby not only claiming exemptions on such income but also engaged in the money laundering activities.

4. Since agricultural income is only used for rate purposes, it was noticed that in a few such high value cases, taxpayers may have inadvertenlly made data entry errors while filling up the fields for agricultural income.

5. Therefore, it is requested that the assessing officers may be directed to

(i)     Verify whether the taxpayer may have made a data entry error while filling up the return.

(ii)    Wherever scrutiny assessment is completed, AO may provide feedback based on assessment records.

(iii)   In cases where proceedings u/s 143(3) are pending, assessing officers may be informed to thoroughly verify the claims.

6.  The list of cases having agriculture income more than ₹ 1 Crore alongwith jurisdictional details is placed at itaxnet at the following path :

Resources → Downloads → Systems → Verification of Agriculture-Income

You are requested to kindly send a status report in this regard after verification as mentioned above. This feedback may be urgently provided to this Directorate before March 20th, 2016 so that we can report the correct figures of claims of agricultural income to the Hon’ble Patna High Court.

7. This issues with the approval of Pr. DGIT(S).

RCC wise list of cases

RCC Code

RCC Name

AY 2007-08

AY 2008-09

AY 2009-10

AY 2010-11

AY 2011-12

AY 2012-13

AY 2013-14

AY 2014-15

AY 2015-16

Grand Total

AGR Agra

1

2

2

3

2

10

AHM Ahmedabad

1

2

2

2

2

4

7

4

5

29

ALD Allahabad

4

3

2

1

2

12

AMR Amritsar

4

3

2

2

3

8

1

3

26

BBN Bhubaneshwar

1

4

5

1

1

4

1

17

BLR Bengaluru

17

26

26

16

31

51

48

59

47

321

BOM Mumbai

19

18

21

17

22

35

29

32

19

212

BPL Bhopal

6

7

5

8

2

5

9

6

6

54

BRD Baroda

1

2

1

3

3

2

1

2

15

CAL Kolkata

20

25

24

24

32

30

38

32

14

239

CHN Kochi

7

12

10

6

7

10

17

22

18

109

CMB Coimbatore

7

14

16

11

13

11

15

13

6

106

DEL Delhi

28

34

24

32

32

31

35

33

26

275

HYD Hyderabad

19

21

20

11

17

18

21

17

18

162

JBP Jabalpur

1

3

3

2

3

4

6

7

5

34

JDH Jodhpur

1

2

3

3

5

4

1

1

1

21

JLD Jalandhar

9

13

6

16

5

5

9

13

12

88

JPR Jaipur

1

3

6

1

1

3

6

7

1

29

KLP Kolhapur

2

1

3

6

11

7

7

5

3

45

KNP Kanpur

1

1

2

4

LKN Lucknow

2

1

4

5

2

4

1

19

MDS Chennai

13

22

17

16

11

25

26

34

17

181

MRI Madurai

1

3

5

4

6

5

4

4

6

38

MRT Merrut

1

3

3

1

4

5

8

6

8

39

NGP Nagpur

1

3

1

1

1

1

2

10

NSK Nasik

4

4

2

5

6

9

7

2

39

PNE Pune

5

8

16

15

33

27

30

28

30

192

PTL Patiala

4

12

9

12

9

10

8

10

74

PTN Patna

4

3

10

7

2

5

4

35

RKT Rajkot

3

2

3

2

2

2

2

16

RTK Rohtak

6

5

5

8

11

5

18

16

9

83

SHL Shillong

5

2

4

3

3

2

1

2

22

SRT Surat

1

1

4

2

2

2

1

1

4

18

TVD Thiruvanantapuram

6

10

11

14

24

29

23

20

20

157

VPN Vishakhapatnam

1

2

2

1

3

2

2

2

15

Grand Total

180

262

270

253

318

358

404

394

307

2746

ST Refund to Services Exporters – has Government scored a self-goal? : March 8, 2016


Taxindiaonlinelogo-jpg   MARCH 08, 2016

By S SivaKumar, LL. B, FCA, FCS, ACSI, MBA, Advocate and R VaidyaNathan, M.Com., M. Phil, Consultant

SERVICES exporters should welcome the beneficial Notification No. 14/2016-CE(NT) dated March 1, 2016, which reads as under :

NOTIFICATION NO

14/2016-Central Excise (N.T)  Dated: March 1, 2016

In exercise of the powers conferred by rule 5 of the CENVAT Credit Rules, 2004, the Central Board of Excise and Customs hereby makes the following amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.27/2012-C.E.(N.T.) dated 18th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 461(E), dated the 18th June, 2012, namely:-

In the said notification, in Paragraph 3, for clause (b), the following shall be substituted, namely:-

“(b) The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed as under:

(i) in case of manufacturer, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944);

(ii) in case of service provider, before the expiry of one year from the date of -

(a) receipt of payment in convertible foreign exchange, where provision of service had been completed prior to receipt of such payment; or

(b) issue of invoice, where payment for the service had been received in advance prior to the date of issue of the invoice.”.

[F. No. 334/8/2016/TRU]

Note –   The principal notification No. 27/2012 Central Excise (N.T) dated the 18th June, 2012 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 461(E) dated the 18th June, 2012.

This substitution has come into effect from March 1, 2016 and has a huge beneficial impact on the services exporters, who were being subjected to a lot of harassment under the old Clause 3(b) of the said Circular which read as follows:

“(b) The application in the Form A along with the documents specified therein and enclosures relating to the quarter for which refund is being claimed shall be filed by the claimant, before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944)”.

Based on the decision of the Hon’ble High Court of Madras in the GTN Engineering case -2012-TIOL-369-HC-MAD-CX, which was rendered in the context of a refund claim filed by a goods exporter, the Department vehemently applied the decision to services exporters also, despite that, in the mPortal decision - 2011-TIOL-928-HC-KAR-ST, the Hon’ble High Court of Karnataka took the view that, the limitation prescribed under Section 11Bof the Central Excise Act, 1944 is not applicable to refund of accumulated cenvat credit (perhaps, in the context of services exporters). Many benches of the CESTAT, including the Bangalore Bench, preferred to follow the GTN decision, rather than the mPortal decision despite that the latter came from the jurisdictional High Court. Some CESTAT Benches, however took the stand (and the right one, in our view) that Section 11B cannot be applied to services exporters and this view is also supported by the fact that the wordings used in Section 11B cannot be applied in the context of services exports. The Bangalore CESTAT in the Apotex Research decision - 2014-TIOL-1836-CESTAT-BANG, while following the GTN decision also took the view that, in so far as the refund claims filed by services exporters are concerned, the limitation should be one year from the date of realization of the export invoices, a view that has been taken in some subsequent CESTAT decisions.

Be that as it may… the Government would seem to have settled these issues by amending the famous Notification No. 27/2012-CE (NT), as aforesaid. A reading of the new notification suggests that the Government seems to indicate that, Section 11B, per se , is not applicable to refund claims filed by services exporters under Rule 5 of the Cenvat Credit Rules, 2004, inasmuch as, reference to Section 11B is conspicuously absent in sub-clause (ii) of Clause(b) of Paragraph (3) of the newly substituted Paragraph in Notification No. 27/2012-CE(NT).

Be that as it may…can a view be also taken that, since the Government has specified a time limit for filing of refund claims by services exporters under Rule 5 of the Cenvat Credit Rules, 2004 for the first time, such a restriction, which can be considered as against the services exporters, cannot be made applicable for the period prior to March 1, 2016? In our opinion, such a view is indeed defendable in the appellate forums and services exporters whose refund claims have been rejected on the basis of the one-year limitation period prescribed under Section 11B of the Central Excise Act, 1944 can still have hopes of getting their refunds, vis-à-vis this new development.

Taking this discussion forward… it seems that there is a dichotomy in the words used in the clause (b) of Paragraph (3) of the said Notification, inasmuch as, in the first part of the clause, the words for the quarter for which refund is being claimed are used, while in sub-clause (ii) of clause(b) of Paragraph (3), there is a mention of the date of receipt of payment vis-à-vis the date of provision of services and/or the date of the invoice.

One way to harmoniously solve this issue would be to take a stand that the new limitation formula should be applied from the end of the relevant quarter and not vis-à-vis each export invoices. This view also find support, in terms of the  Board Circular No. 112/6/2009-STdated 12-3-2009  issued in the context of Notification No. 41/2007-S.T. dated October 6, 2007, which has, clarified interalia , that the limitation period as it then existed, from start from the end of the quarter. Currently, as is known, the Department is taking the view that the one-year limitation is to be worked out, vis-à-vis the beginning of the relevant quarter wherein, the limitation period would be an effective 9 months only.

There is yet another confusion/anomaly vis-à-vis the substituted sub-clause (ii)(b),…there is no mention of the services being provided in the said sub-clause. Consequently, it would appear that, an exporter, who issues an invoice for an advance payment received would be eligible for filing a refund claim, even without providing the services as such.

It would look like the Government has scored a self-goal with this Notification, as the services exporters can take a litigating view, as aforesaid, in terms of export transactions prior to March 1, 2016. For advocates and consultants like us, there would be more opportunities for sure.

Before concluding………

Knowingly or unknowingly, the Government would seem to have a done a huge favour to services exporters, by issuing this Notification.

Govt buries EPF tax after massive protest from salaried middle-class : 09-03-2016


Just over a week after the announcement, Finance Minister Arun Jaitley on Tuesday rolled back his controversial Budget proposal to tax Employees’ Provident Fund (EPF) withdrawal. The Budget had announced that 40 per cent of the total corpus withdrawn from the EPF would be tax-exempt and the balance 60 per cent would be taxable unless the amount is used to buy an annuity product. Jaitley also took back his earlier proposal to tax contribution made by an employer beyond Rs 1.5 lakh a year to EPF. Both the proposals had drawn strong protest from the Opposition, trade unions and the salaried class.

Jaitley, however, retained a proposal not to tax 40 per cent of money withdrawn from National Pension System (NPS). This means that only balance 60 per cent would be taxed against the current practice of taxing the entire amount withdrawn from NPS.

Making a suo motu statement in the Lok Sabha on the issue, Jaitley said, “In view of the representations received, the government would like to do comprehensive review of this proposal and therefore I withdraw the proposals in paragraph 138 and 139 of my Budget speech. The proposal of 40 per cent exemption given to NPS subscribers at the time of withdrawal remains.” Paragraph 138 proposed to tax money withdrawn from EPF beyond 40 per cent, if the sum is not invested in annuity. Paragraph 139 proposed to tax contribution made by an employer exceeding Rs 1.50 lakh in EPF a year. Both the proposals were to come into effect from April 1, 2016.

After this, no amount withdrawn from EPF account would be taxed, whether it is invested in annuity or not. In other words, the present situation continues. The FM did not alter paragraph 137 of the speech which proposed not to tax 40 per cent of the corpus withdrawn from NPS at the time of retirement. Jaitley had earlier indicated that he would address the concerns on retirement tax when he replies to the debate on Budget 2016-17 in Parliament, which would start from Wednesday in the Lok Sabha.

The Budget proposals on EPF tax drew flak from both employee unions and political parties who said the government was taxing employees at the fag-end of their career, when they needed money the most. “The government has been forced to roll it back under continuous pressure from the unions,” said A K Padmanabhan, president of Centre of Indian Trade Unions (CITU) and a board member of EPF Organisation.

The government had justified the move saying the attempt was to create a pensioned society.

A day after the Budget, it had indicated in a statement that it could consider imposing tax only on the interest part of the corpus for withdrawal of money beyond 40 per cent in lump sum.

But Tuesday’s announcement completely rolled back the EPF tax proposal.

In his statement, Jaitley said a number of representations had been received from various sections of the society, including MPs, suggesting that this would force people to invest in annuity product even if they were not willing to do so.

CENTRE’S PREVIOUS FLIP-FLOPS:
Finance Minister Arun Jaitley’s withdrawal of Budget proposal to levy tax on Employees Provident Fund (EPF) withdrawals is one of several occasions in past 21 months when the Centre has reconsidered its position:
MGNREGA: In one of his early speeches in the Lok Sabha, PM Narendra Modi had trashed it as a living monument to Congress’ failures. In this Budget, the government has allocated highest-ever funds for the scheme
Aadhaar Bill: BJP had rejected UPA’s National Identification Authority of India Bill, 2010. However, the govt is now pushing for a Money Bill, which is almost identical
Land Bill: Centre issued ordinances and vowed to amend UPA’s 2013 Land Bill to make it pro-industry. The Bill is now slated to be withdrawn
MAT: Rolled back past cases of Minimum Alternate Tax on foreign portfolio investors
ITR forms: Government had to drop new Income-Tax Return forms introduced in March 2015 after being criticised for seeking details like foreign travels and dormant bank accounts
Insurance Laws (Amendment) Bill: BJP had blocked the Insurance Bill during UPA rule. Once in power, it ensured passage of the Bill in both Houses
Internet porn ban: Last August, Centre moved to block access to 850 pornographic websites. However, after criticism, it restricted the ban to child pornography

“The main argument is that the employee should have choice of desire where to invest. Theoretically, such freedom is desirable but it is important for the government to achieve policy objectives by the instrumentality of taxation. In the present reform the policy objective is not to get more revenue but to encourage the people to join the pension scheme. There are various suggestions received, which can also achieve the same policy objective of encouraging people to join the pension scheme,” he said.

The government had given these proposals in the Budget because Pension Fund Regulatory and Development Authority (PFRDA) demanded tax parity with EPF. It had proposed EEE (exempt, exempt, exempt) treatment at all stages of contribution, accretion and withdrawal from NPS. With Tuesday’s announcement, tax parity would still not be there between NPS and EPF, but NPS would be in a better situation that earlier.

At a FICCI event later, minister of state for finance Jayant Sinha attributed the roll back to legitimate concerns by lots of people.

Tapati Ghose, partner, Deloitte Haskins & Sells said, “EPF will hence continue to be an attractive investment option with an EEE scheme. The icing on the cake is that the exemption provided for 40 per cent withdrawal from the NPS corpus still remains. The NPS scheme would hence now move from an EET scheme to a partially exempt scheme at the time of withdrawal, making this more attractive.”

The Employee Provident Fund Organisation has around 37 million members across India. As many as 30 million of them earn less than Rs 15,000 a month, who would not have been impacted by the Budget proposals.

Source : Business Standard

F.NO.279/MISC./M-142/2007-ITJ (PART) – 8-3-2016


Clarification on Applicability of Circular 21 OF 2015 – Circular – Dated 8-3-2016

LETTER F.NO.279/MISC./M-142/2007-ITJ (PART)

DATED 8-3-2016

The monetary limits for filing appeals before the Income Tax Appellate Tribunals and High Courts were raised to ₹ 10 lakhs and ₹ 20 lakhs respectively by Circular 21 of 2015 dated 10.12.2015. Queries have been received regarding the applicability of Circular 21 of 2015 to cross objections filed by the Department before the ITAT undersection 253(4) of the Income-tax Act and to references to the High Court under sections 256(1) and 256(2) of theAct.

2. The matter was examined in the CBDT and it is clarified that the monetary limit of ₹ 10 lakhs for filing appeals before the ITAT would apply equally to cross objections under section 253(4) of the Act. Cross objections below this monetary limit, already filed, should be pursued for dismissal as withdrawn/not pressed. Filing of cross objections below the monetary limit may not be considered henceforth.

3. Similarly, references to High Courts below the monetary limit of ₹ 20 lakhs should be pursued for dismissal as withdrawn/not pressed. References below this limit may not be considered henceforth.

4. This clarification may be brought to the attention of all concerned.

Notification No. : 20/2016 Dated: 8-3-2016


[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise and Customs

Notification No. 20/2016-Service Tax

New Delhi, the 8th March, 2016

18 Phalguna, 1937Saka

G.S.R….. (E). - In exercise of the powers conferred by sub-sections (1) and (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994,namely:-

1. (1) These rules may be called the Service Tax (Second Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Service Tax Rules, 1994, in Form ST- 3,-

(i) in Part B,-

(a) in the Table “B1 FOR SERVICE PROVIDER”, after serial number B1.21 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:-

“B1.22 Swachh Bharat Cess payable based on entries in serial number B1.15
B1.23 Swachh Bharat Cess payable based on entries in serial number B1.16
B1.24 Total Swachh Bharat Cess payable B1.24 = B1.22+B1.23”

(b) in the Table “B2 FOR SERVICE RECEIVER”, after serial number B2.21 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:-

“B2.22 Swachh Bharat Cess payable based on entries in serial number B2.15
B2.23 Swachh Bharat Cess payable based on entries in serial number B2.16
B2.24 Total Swachh Bharat Cess payable B2.24 = B2.22 +B2.23”

(ii) in Part C, in the Table, after serial number C1 and the entries relating thereto, the following serial number and entries shall be inserted, namely:-

“C1.1 Swachh Bharat Cess deposited in advance

(iii) after Part D, after the Table “SERVICE TAX PAID IN CASH AND THROUGH CENVAT CREDIT”, the following shall be inserted, namely:-

“PART DA- SWACHH BHARAT CESS (SBC) PAID IN CASH AND THROUGH ADJUSTMENTS

Month/Quarter Apr/Oct May/Nov Jun/Dec July/Jan Aug/Feb Sep/Mar
DA1 Swachh Bharat Cess paid in cash
DA2 By adjustment of amount paid as SBC in advance under rule 6(1A) of the Service Tax Rules, 1994
DA3 By adjustment of excess amount paid earlier as SBC and adjusted, by taking credit of such excess SBC paid, in this period under rule 6(3) of theService Tax Rules, 1994
DA4 By adjustment of excess amount paid earlier as SBC and adjusted in this period underrule 6(4A) of the Service Tax Rules, 1994
DA5 By book adjustment in the case of specified Government Departments
DA6 Total Swachh Bharat Cess paidDA6=DA1+DA2+DA3+DA4+DA5

(iv) in Part G, in the Table “ARREARS, INTEREST, PENALTY, ANY OTHER AMOUNT ETC PAID”, after serial number G12 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:-

“G13 Arrears of Swachh Bharat Cess paid in cash
G14 Interest on SBC paid in cash
G15 Penalty on SBC paid in cash
G16 Total payment of arrears, interest, penalty on Swachh Bharat CessG16= G13 +G14+G15”

(v) in PART H,-

(a) for Table heading “H1 DETAILS OF CHALLAN (vide which service tax, education cess, secondary and higher education cess and other amounts have been paid in cash)”, the following shall be substituted, namely:-

“H1 DETAILS OF CHALLAN (vide which Service Tax,Swachh Bharat Cess, Education Cess, Secondary and Higher Education Cess and other amounts have been paid in cash)”;

(b) for Table Heading “H2 Source document details for payments made in advance/adjustment, for entries made at column D3, D4, D5, D6, D7; E3, E4, E5, E6, E7; F3,F4 F5,F6, F7; & G1 to G11”, the following shall be substituted, namely:-

“H2 Source document details for payments made in advance/adjustment, for entries made at column D3, D4, D5, D6, D7; DA1, DA2, DA3, DA4, DA5 ; E3, E4, E5, E6, E7; F3,F4, F5, F6, F7; and G1 to G11 and G13 to G15.”

(Rajeev Yadav)

Director to the Government of India

[F.No. 137/79/2015-Service Tax]

Note:- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification No. 2/94-SERVICE TAX, dated the 28th June, 1994 vide number G.S.R. 546 (E), dated the 28thJune, 1994 and last amended vide notification No. 19/2016-SERVICE TAX, dated the 1st March, 2016vide number G.S.R. 987 (E), dated the 1st March, 2016.

 

Notification No. S.O. 1073(E) 7-3-2016


Set up a sector specific Special Economic Zone for information technology and information technology enabled services at Village-Kharadi, Taluka Haveli, District Pune in the State of Maharashtra – S.O. 1073(E) – Dated 7-3-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi the 7th March, 2016

S.O. 1073(E).- WHEREAS, M/s. Gera Developments Private Limited, a private organization in the State of Maharashtra, had proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act) to set up a sector specific Special Economic Zone for information technology and information technology enabled services at Village-Kharadi, Taluka Haveli, District Pune in the State of Maharashtra;

And, Whereas, the Central Government, in exercise of the powers conferred by sub-section (1) of section 4 of the said Act read with rule 8 of the Special Economic Zone Rules 2006, had notified an area of 10.14 hectares vide Ministry of Commerce and Industry Notification Number S. O. 1013(E) dated 23rd April, 2009;

And, Whereas, M/s. Gera Developments Private Limited has proposed to de-notify the entire area of 10.14 hectares of the above Special Economic Zone;

And, Whereas, the State Government of Maharashtra has given its “No Objection” to the proposal vide letter no. SEZ-1814/CR-19/Indi-2 dated 20th November, 2015.

And, Whereas, the Development Commissioner, SEEPZ Special Economic Zone has recommended the proposal for de-notification of the entire area of 10.14 Hectares of the Special Economic Zone;

Now, Therefore, in exercise of the powers conferred by first proviso to rule 8 of the Special Economic Zones Rules 2006, the Central Government hereby rescinds the above notification except as respects things done or omitted to be done before such rescission.

[F. No. F.2/678/2006-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

No. F. NO. 312/109/2015-OT Dated: 7-3-2016


U/s 245 of Income Tax Act 1961 revised timeline for verification of arrear of demand – Circular – Dated 7-3-2016 – Income Tax

OFFICE MEMORANDUM

DATED 7-3-2016

Reference is invited to Office Memorandum of even number dated 29-1-2016 vide which the procedure to be followed in cases where notice under section 245 has been issued for returns to be processed during FY 2015-16 was specified by the Board. It was prescribed in the O.M. under reference that-

(a) In cases where that taxpayer has contested the demand, CPC would issue a reminder to the Assessing Officer about the contention of the taxpayer, asking him to either confirm, or make appropriate changes to the demand within thirty days. In case no response is received from the AO within thirty days. CPC would issue the refund without any adjustment. The responsibility of, non-adjustment of refund against outstanding arrears, if any, would lie with the Assessing Officer.

(b) In cases where there is no response from the taxpayer, CPC would issue a reminder to the taxpayer, asking him to either agree or disagree with the demand and submit response on the e-filling portal within thirty days. In case no response is received from the taxpayer within thirty, days, CPC would adjust the demand and issue the balance refund, if any, to the taxpayer.

2. In view of the large volume of pending refunds which arc subject to proceedings under section 245 and the timeline of 30 days for responding to the notice allowed to the assessee and the same time period allowed to the Assessing Officer to confirm/correct the demand, it is taking too long for the demand to be verified and the refunds to be issued, leading to rise of grievances.

3. With a view to clear the pendency of refunds which are subject to verification under section 245, it has been decided that the timeline of 30 days for the assessee and the Assessing Officer specified in the O.M. dated 29-1-2016 may be reduced to 15 days with regard to the notices under section 245 to be issued in the balance period of the current financial year. This is a one-time measure to clear the backlog of refunds and accordingly the reduced timeline of 15 days shall be valid only till 31-3-2016.

4. This issues with the approval of Chairman, CBDT.

[F. NO. 312/109/2015-OT]

Notification No. S.O. 1071(E) 7-3-2016


Set up a Sector Specific Special Economic Zone for information technology and information technology enabled services at Village-Gokul, Taluk-Hubli District-Dharwad in the State of Karnataka – S.O. 1071(E) – Dated 7-3-2016 – Special Economic Zone

 

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 7th March, 2016

S.O. 1071(E).- Whereas, M/s. Infosys Limited has proposed under section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a Sector Specific Special Economic Zone for information technology and information technology enabled services at Village-Gokul, Taluk-Hubli District-Dharwad in the State of Karnataka;

And, Whereas, The Central Government Is Satisfied That Requirements Under Sub-Section (8) of Section 3 Of The Said Act, And Other Related Requirements Are Fulfilled And It Has Granted Letter of Approval Under Sub-Section (10) of Section 3 of The Said Act  For Development, Operation And Maintenance of The Above Sector Specific Special Economic Zone On 29th June, 2015;

Now, Therefore, The Central Government, In Exercise of The Powers Conferred By Sub-Section (1) of Section 4 of The Special Economic Zones Act, 2005 And In Pursuance of Rule 8 of The Special Economic Zones Rules, 2006, Hereby Notifies The 17.422 Hectares Area At Above Location With Survey Numbers Given In The Table Below As A Special Economic Zone, Namely:-

Table

S. No.

Name of Village

Khasara No.

Area (in hectares)

1.

Gokul

217P

0.101

2.

353P

0.020

3.

221P

0.020

4.

222

0.484

5.

223

0.766

6.

224

0.343

7.

225

1.472

8.

226P

0.252

9.

238

2.218

10.

239/1P

0.464

11.

239/2P

3.075

12.

245/1P

0.796

13.

245/2P

0.010

14.

245/3P

0.121

15.

246/1P

3.024

16.

246/2P

1.119

17.

246/3P

0.006

18.

247/1P

0.081

19.

247/2P

1.280

20.

248P

0.827

21.

254P

0.121

22.

257/3P

0.323

23.

257/4P

0.353

Total

17.422

And, Therefore, the Central Government, in exercise of the powers conferred by sub-section (1) of section 13 of the Special Economic Zones Act, 2005 (28 of 2005), hereby constitutes a Committee to be called the Approval Committee for the above Special Economic Zone for the purposes of section 14 of the said Act consisting of the following Chairperson and Members, namely:-

1. Development Commissioner of the Special Economic Zone Chairperson ex officio;
2. Director or Deputy Secretary to the Government of India, Ministry of Commerce and Industry, Department of Commerce or his nominee not below the rank of Under Secretary to the Government of India Member ex officio;
3. Zonal Joint Director General of Foreign Trade having territorial jurisdiction over the Special Economic Zone Member ex officio;
4. Commissioner of Customs or Central Excise having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;
5. Commissioner of Income Tax having territorial jurisdiction over the Special Economic Zone or his nominee not below the rank of Joint Commissioner Member ex officio;
6. Director (Banking) in the Ministry of Finance, Banking Division, Government of India Member ex officio;
7. Two officers, not below the rank of Joint Secretary, to be nominated by the State Government Member ex officio;
8. Representative of the Developer of the zone Special invitee

And, Therefore, the Central Government, in exercise of the powers conferred by sub-section (2) of section 53 of the Special Economic Zones Act, 2005 (28 of 2005), hereby appoints the —- day of February, 2016 as the date from which the above Special Economic Zone shall be deemed to be Inland Container Depot under section 7 of theCustoms Act, 1962 (52 of 1962).

[F. No. F.1/2/2015-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

Notification No. : 13/2016 Dated: 03-03-2016


Income-tax (4th Amendment) Rules, 2016) – 13/2016 – Dated 3-3-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 13/2016

New Delhi, the 3rd March, 2016

INCOME-TAX

S.O. 650 (E).‐ In exercise of the powers conferred by section 295 read with section 32 of the Income‐tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income‐tax Rules, 1962, namely:‐

1. (1) These rules may be called the Income-tax (4th Amendment) Rules, 2016).

(2) They shall come into force on the 1st day of April 2016.

2. In the Income-tax Rules, 1962, in New APPENDIX I, in the TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE, in PART A relating to TANGIBLE ASSETS, under the sub-heading III. MACHINERY AND PLANT, in item (8), in sub-item (xii) relating to Mineral oil concerns, after entry (b), the following entry shall be inserted, namely:-

Block of assets

Depreciation allowance as percentage of written down value

1

2

“(c) Oil wells not covered in clauses (a) and (b) 15”.

[F. No.142/33/2015-TPL]

(PITAMBAR DAS)

DIRECTOR (TPL)

Note: The principal rules were published in the Gazette of India vide notification number S.O. 969(E), dated the 26th March, 1962 and last amended vide notification number S.O. 637(E), dated the 01/03/2016.

Budget 2016: Tax on EPF; annuity push a likely windfall for insurance companies : 03-03-2016


Budget 2016: Around 3.7 crore EPF members may be fretting over the government’s proposal to tax 60 per cent of the corpus unless it is diverted into an annuity plan, but there is conspicuous cheer from one corner — life insurance companies. They are the only ones offering annuity products and could end up as the beneficiaries of any move that potentially forces a portion of the EPF money to flow in to annuity pension schemes for tax reasons.

In the Budget presented on Monday, the finance minister Arun Jaitley proposed to tax 60 per cent of the EPF corpus at the time of withdrawal. As it drew criticism from several corners, the government on Tuesday clarified that the money would not attract tax if an employee contributes 60 per cent of the corpus in annuity products provided by insurance companies. Top officials at least two life insurance companies admitted that the move will provide a big impetus to the annuity business in India.

A member of the EPFO’s Central Board of Trustees on Wednesday alluded to the government’s push towards annuity-based pension schemes being done to create a market for insurance companies. “Once the government increased the FDI limit in insurance from 26 per cent to 49 per cent, all the effort has been to increase their business. On Tuesday, by stating in their clarification that the withdrawal from EPF will not be taxed if it is invested in annuity schemes, the government is trying to create market for pension products offered by insurance companies,” DL, Sachdev, All India Trade Union Congress Secretary told The Indian Express.

The Indian insurance sector has witnessed a rebound in investor interest after the Centre hiked the FDI cap from 26 per cent to up to 49 per cent and Parliament ratified the decision in March 2015. Till December 2015, at least 10 insurance companies saw an increase in stake by their foreign partners in Indian joint venture insurance firms.

Interestingly, the move to push salaried people towards annuity products comes at a time when the global experience points to efforts by governments to diversify the option before people beyond annuity instruments. In the UK, for instance, until April 6, 2015, most people with a defined contribution pension had to buy an annuity as the pension tax legislation strongly encouraged this, applying a 55 per cent tax charge to lump sum or flexible payments other than in limited circumstances. Changes, however, were introduced in April last year, wherein the UK Government radically increased the size of the pension pot that could be taken as a lump sum and introduced more flexibility into income drawdown arrangements — which allows an individual to draw an income from their fund while leaving the rest of it invested. In the UK, annuities have been among the biggest money-spinners for the listed life insurers and these schemes, in 2014, reportedly accounted for around a fifth of British life insurers’ revenues — and two-thirds of their “new business” profits.

In India, the insurance players have reacted to the move by saying that this will provide an impetus to annuity products, even as they called for tax benefit on annuity income. “The proposal will definitely provide a boost to the annuity business in the long-term. However, under the current Income Tax laws the entire annuity is taxable in the hands of the recipient making the product unattractive. Annuities have two components viz. interest and principal. There is a need to consider exempting the principal component of the annuity from tax,” said Sandeep Batra, ED, ICICI Prudential Life Insurance.

Amit Kumar Roy, chief distribution officer at Aegon Life said, “The government’s proposal will definitely provide an impetus to the pension market, which is currently very small. Other than the Central government employees, very few have the pension security.”

While the government has currently proposed to allow only annuity product as the option where the money can be deployed for tax gain, financial planners say that the government should look to expand the option beyond just one scheme. “While Indians like to have access to their capital, investing in annuity product locks the capital. The government should look to expand the options for investors where they can park 60 per cent of the EPF corpus. It will allow the investor to invest a part of the corpus with annuity product and the other part somewhere else where there is access to capital,” said a certified financial planner, who did not wish to be named.

The UK’s decision to provide flexibility in the products where investors can park their corpus was also based on some malpractices in the market. In December 2014, the UK’s Financial Conduct Authority published the results of a market study that reviewed annuity sales practices and found evidence indicating that firms’ sales practices are contributing to consumers not shopping around and switching and firms failing to tell customers that other providers may offer enhanced annuities for medical conditions that they do not underwrite.

Source : The Hindu

Govt can exceed growth target with less obstructions: Jaitley : 03-03-2016


Finance Minister Arun Jaitley said on Wednesday that the gross domestic product (GDP) growth rate in 2016-17 could exceed the 7-7.75 per cent projected in the Economic Survey if there is less political obstructionism and the government is allowed to push through important Bills like the goods and services tax and the bankruptcy law.

The minister also said he had hoped the ‘rain gods would be kinder this year’ compared with previous monsoons.

“With all the steps we have taken and hopefully if the next financial year is politically not as obstructive as the previous one, we will be able to push through many more reforms. I am sure we will beat the target that Arvind (Subramanian) has set in the Economic Survey,” Jaitley said at a post-Budget meeting with representatives of various industry bodies.

Chief Economic Advisor Arvind Subramanian, in the Economic Survey, projected a growth rate of 7-7.75 per cent for the next financial year. The economic growth rate for 2015-16 has been estimated at 7.6 per cent, the highest in the last five years.

Jaitley also said that while pushing economic reforms and increasing public spending, the government would stick to the fiscal consolidation path.

“While improving public investments and creating an environment for both global and domestic investments to move up, maintaining fiscal discipline was extremely important,” he said, adding the nation cannot claim to be the fastest-growing major economy in the world if it doesn’t maintain fiscal discipline.

Amid debate over balancing growth and fiscal prudence, Jaitley in his Budget decided to the keep the fiscal deficit target for 2016-17 at 3.5 per cent of GDP, in line with the revised fiscal consolidation road map. The fiscal deficit for FY16 has been maintained at 3.9 per cent, as was indicated in the Budget Estimates for 2015-16.

He also said in his Budget speech that a high-level committee will be set up to review the working of the Fiscal Responsibility and Budget Management. Welcoming the Reserve Bank of India’s easing of rules to allow lenders to bolster capital ratios, Jaitley said the government will take all steps and provide resources to keep public sector banks in good health.

Source : PTI

Notification No. : 12/2016 Dated: 02-03-2016


Exemption u/s 10(46) of the Income-tax Act, 1961 State Load Despatch Centre Unscheduled Interchange Fund West Bengal State Electricity Transmission Company Limited (PAN AAIAS0980J), a trust constituted under the Electricity Act, 2003 (36 of 2003) in respect of the specified income arising to that trust – 12/2016 – Dated 2-3-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 12/2016

New Delhi, the 2nd March, 2016

S.O. 639(E).-In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the State Load Despatch Centre Unscheduled Interchange Fund–West Bengal State Electricity Transmission Company Limited (PAN AAIAS0980J), a trust constituted under the Electricity Act, 2003 (36 of 2003) in respect of the following specified income arising to that trust, namely :-

(a) residual money in the unscheduled interchange pool balance account;

(b) interest on fixed deposits and auto-sweep accounts; and

(c) income incidental to or related to unscheduled interchange.

2. The notification shall be subject to the following conditions, namely that the State Load Despatch Centre Unscheduled Interchange Fund – West Bengal State Electricity Transmission Company Limited,-

(a) shall not engage in any commercial activity;

(b) shall not change its activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file return of income in accordance with the provision of clause (g) of sub-section (4C) section 139of the said Act.

3. This notification shall be deemed to be applicable for the financial years 2012-2013, 2013-2014, 2014- 2015 and applicable for the financial years 2015-2016 and 2016-2017.

[F. No. 196/51/2012-ITA.I]

DEEPSHIKHA SHARMA, Director

Indirect Tax Dispute Resolution Sche me, 2016 – will this really result in reduction of litigation? – 01-03-2016


Taxindiaonlinelogo-jpg        MARCH 01, 2016

By S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate

THE FM has announced the Indirect Tax Dispute Resolution Scheme, 2016 in the Finance Bill, 2016, in terms of which, in respect of appeals pending before the First Appellate Authority, i.e the Commissioner (Appeals), the appellant, on submitting a declaration with the designated authority, shall get immunity from all proceedings if he pays the service tax along with interest and penalty up to 25% of the penalty imposed in the adjudication order.

One would wonder as to the efficacy of this proposal in reducing overall litigation, especially given the fact, that the tax liability would be less than Rs. 50 lakhs in respect of appeals filed before the Commissioner (Appeals). As is known, a vast majority of demands raised on assessees would run into crores of rupees, necessitating adjudication by the Commissioners and these are not covered under the Scheme. Even for appellants who have filed appeals before the First Appellate Authority, it may not make sense to opt for the scheme, as in 99 out of 100 cases, the service tax demand itself would be frivolous and unsustainable and can be successfully fought at the level of the CESTAT.

Moreover, it remains to be seen as to how this scheme would compete with Sections 76 and 78 of the Finance Act, 1994, in terms of which, the assessee is allowed to pay a reduced penalty of 25% of the penalty imposed by the Adjudicating Officer, along with interest and tax, within 30 days of the adjudication order. Of course, there is no specific mention of prosecution related proceedings being dropped under Section 78.

While the intention of the Government seems laudable, one really wonders whether this scheme would be a success, at the ground level. Had the Government provided for the complete waiver of interest and penalty, many litigants would have opted for this Scheme.

Increase in normal period for issuance of SCNs – protecting inefficient Babus : 01-03-2016


Taxindiaonlinelogo-jpgBy S Sivakumar, LL.B, FCA, FCS, ACSI, MBA, Advocate

IN what could be termed as an attempt largely aimed at protecting an otherwise totally inefficient tax bureaucracy, the Government has proposed changes in Section 11A of the Central Excise Act, 1944 and Section 73 of the Finance Act, 1994. The normal period for issue of Show Cause Notices in cases where there is no suppression of facts etc. is proposed to be amended, to substitute “one year” in Section 11A with   “two years” and   “eighteen months” in Section 73 of the Finance Act, 1994 with   “thirty months”. TIOL reports that, in the last Central Excise Tariff Conference, the Vizag zone had suggested that the Board should consider proposing amendment in law to the effect that in case of audit the normal period of limitation would be much longer say three years or five years and that the Board seems to have accepted this   partially . A parallel hike is also seen in section 28 of the Customs Act, 1962 where the normal period is also raised to two years.

What is important to see here is, as to, the impact this proposal would have on the tax payers, especially, in terms of the increase in the normal period, to 30 months, as regards service tax. It is common knowledge that both the Departmental officers and the assessees have serious issues in interpreting the service tax law and the result is the inevitable confusion that prevails. With most show cause notices getting confirmed at the adjudication level, the benefit of a lower normal period would have come to the rescue of the hapless taxpayer, at the appellate level. While one could have understood the need for the normal period to be increased from one year to 18 months, the current proposal to further increase it to 30 months comes as a rude shock, considering especially the fact that, the filing of the ST-3 returns has been automated and the jurisdictional officer can have all the information that he requires, at the press of a button. If the Babus are so busy that they cannot look into the returns and other information filed with them and issue show cause notices for a period of up to 30 months from the date of the filing of such returns, what else are they doing? This is a very pertinent question that the Government has to answer, given the fact that, over the last two years, one has seen a significant increase in the number of Commissioners, Principal Commissioners, etc. at the service tax Commissionerates.

Extending the normal period would send a wrong signal to investors, to whom, the Government is repeatedly trying to sell the concept of ‘ease of doing business in India’. This step, by itself, would result in the increase in service tax related litigation, as the Babus now know that, they have 30 months’ time from the end of the relevant half year, to issue SCNs to cover the normal period. The proposal is a direct acknowledgement of the fact that our tax bureaucracy is inefficient and incapable.

As far as the hapless taxpayer is concerned…this move would increase the risks associated in dealing with the service tax law, as tax can be demanded under the normal period for a period of 30 months from the end of the half year (effectively, 36 months from the tax month).

In the coming years, there is every possibility that there will not be anything called normal period as in any case the department ropes in the extended period while making any demand from the poor tax payer.

Only the Almighty can save the hapless lesser mortals!

Notification No. : 11/2016 Dated: 01-03-2016


Income-tax (3rd Amendment) Rules, 2016 – 11/2016 – Dated 1-3-2016 – Income Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

[CENTRAL BOARD OF DIRECT TAXES]

Income-tax

NOTIFICATION No.11/2016

New Delhi, the 1st March, 2016

S.O. 637 (E).─ In exercise of the powers conferred by sub-section (1) of section 249, read with section 295 of theIncome-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1.  (1) These rules may be called the Income-tax (3rd Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2.  In the Income-tax Rules, 1962 (herein after referred to as the said rules), for rule 45, the following rule shall be substituted, namely:-

45. Form of appeal to Commissioner (Appeals).-(1) An appeal to the Commissioner (Appeals) shall be made in Form No. 35.

(2) Form No. 35 shall be furnished in the following manner, namely:-

(a) in the case of a person who is required to furnish return of income electronically under sub-rule(3) of rule 12,-

(i) by furnishing the form electronically under digital signature, if the return of income is furnished under digital signature;

(ii) by furnishing the form electronically through electronic verification code in a case not covered under sub-clause (i);

(b) in a case where the assessee has the option to furnish the return of income in paper form, by furnishing the form electronically in accordance with clause (a) of sub-rule(2) or in paper form.

(3) The form of appeal referred to in sub-rule (1), shall be verified by the person who is authorised to verify the return of income under section 140 of the Act, as applicable to the assessee.

(4) Any document accompanying Form No. 35 shall be furnished in the manner in which the said form is furnished.

(5) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall-

(i) specify the procedure for electronic filing of Form No.35 and documents;

(ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule(2), for the purpose of verification of the person furnishing the said form; and

(iii) be responsible for formulating and implementing appropriate security, archival and retrieval of policies in relation to the said form so furnished.”

3. In the said rules, in Appendix-II, for Form No.35, the following form shall be substituted, namely:-

“FORM NO. 35

(See rule 45)

Appeal to the Commissioner of Income-tax (Appeals)

Personal Information

First Name Middle Name Last Name or Name of Entity PAN
TAN (if available)
Flat/ Door/ Block No. Name of Premises/ Building/ Village Road/ Street/ Post Office
Area/ Locality Town/City/District State

(Select)

Country (Select) Pin Code Phone No. with STD code/ Mobile No. Email Address

 

Whether notices/ communication may be sent on email? Yes/ No

Order against which Appeal is filed

1 Assessment year in connection with which the appeal is preferred/ Enter financial year in case appeal is filed against an order where assessment year is not relevant Assessment Year  
Financial Year  
2 Details of the order appealed against
a Section and sub-section of the Income-tax Act,1961  
b Date of Order  
c Date of service of Order / Notice of Demand  
3 Income-tax Authority passing the order appealed against  

Pending Appeal

4 Whether an appeal in relation to any other assessment year/ financial year is pending in the case of the appellant with any Commissioner (Appeals) Yes/ No
4.1 If reply to 4 is Yes, then give following details.-
  a Commissioner (Appeals), with whom the appeal is pending  
  b Appeal No. and date of filing of appeal  
  c Assessment year/ financial year in connection with which the appeal has been preferred  
  d Income-tax Authority passing the order appealed against  
  e Section and sub-section of the Income-tax Act, 1961, under which the order appealed against has been passed  
  f Date of such Order  

Appeal Details

5 Section and sub-section of the Income-tax Act,1961 under which the appeal is preferred  
6 If appeal relates to any assessment  
  a Amount of Income Assessed (in Rs.)  
  b Total Addition to Income (in Rs.)  
  c In case of Loss, total disallowance of Loss in assessment (in Rs.)  
  d Amount of Addition/ Disallowance of Loss disputed in Appeal (in Rs.)  
  e Amount of Disputed Demand (in Rs.) – Enter Nil in case of Loss  
7 If appeal relates to penalty:

 

  a Amount of penalty as per Order (in Rs.)  
  b Amount of penalty disputed in Appeal (in Rs.)  

Details of Taxes paid

8 Where a return has been filed by the appellant for the assessment year in connection with which the appeal is filed, whether tax due on income returned has been paid in full Yes/No/ Not Applicable
8.1 If reply to 8 is Yes, then enter details of return and taxes paid
  a Acknowledgement number  
  b Date of filing  
  c Total tax paid  
9 Where no return has been filed by the appellant for the assessment year, whether an amount equal to the amount of advance tax as per section 249(4)(b) of the Income-tax Act, 1961 has been paid Yes/No/ Not Applicable

 

9.1 If reply to 9 is Yes, then enter details

Tax Payments

BSR Code Date of payment Sl. No. Amount
       
Total      

 

10 If the appeal relates to any tax deductible under section 195 of the Income-tax Act, 1961 and borne by the deductor, details of tax deposited under section 195(1)

 

BSR Code Date of payment Sl. No. Amount
       
       

 

Statement of facts, Grounds of Appeal and additional evidence

11 Statement of Facts  
Facts of the case in brief (not exceeding 1000 words)  
List of documentary evidence relied upon  
12 Whether any documentary evidence other than the evidence produced during the course of proceedings before the Income-tax Authority has been filed in terms of rule 46A Yes / No
12.1 If reply to12 is Yes, furnish the list of such documentary evidence  
13 Grounds of Appeal (each ground not exceeding 100 words)  
  1.  
  2.  
  3.  

Appeal filing details

14 Whether there is delay in filing appeal Yes/ No
15 If reply to 13 is Yes, enter the grounds for condonation of delay (not exceeding 500 words)  
16 Details of Appeal Fees Paid

BSR Code Date of payment Sl. No. Amount
       
       

 

17 Address to which notices may be sent to the appellant

Form of verification

I, ____________________________the appellant, do hereby declare that what is stated above is true to the best of my information and belief. It is also certified that no additional evidence other than the evidence stated in row 12.1 above has been filed.

Place

Signature

Date ”

[F.No.149/150/2015-TPL]

(Ekta Jain)

Deputy Secretary to the Government of India

Note.- The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide notification number S.O. 969(E), dated the 26th March, 1962 and last amended vide notification number S.O.502(E), dated the 17.02.2016.

Unwelcome amendments in penalty related provisions in Income tax Act – March 1, 2016


Taxindiaonlinelogo-jpg        MARCH 01, 2016

By S Sivakumar, LL.B., FCA. FCS, ACSI, MBA, Advocate

THE good old Section 271(1)(c) of the Income tax Act,1961 is proposed to be withdrawn. As we know, this very important section dealt with the powers of the Assessing Officer of the Appellate Commissioner or the Principal Commissioner (in case of revisionary proceedings) to levy penalty in cases where the assessee has concealed the particulars of the income declared in the return or had furnished inaccurate particulars of such income. As any assessee who has handled assessment proceedings would confirm, the proposal to levy penalty under Section 271(1)© was a regular feature of assessment proceedings and the Assessing/Appellate/Revisionary Authority had absolute discretion in levying penalty, which could range from 100% to 300% of the tax involved and in most cases, the assessees managed not to have penalties levied on them.

Now, this good old Section is proposed to be given a burial and in its place, a new Section 270A is proposed to be introduced. Sub-section (1) of the proposed new section 270A seeks to provide that the Assessing Officer, Commissioner (Appeals) or the Principal Commissioner or Commissioner may levy penalty if a person has under reported his income. It is proposed that a person shall be considered to have under reported his income if,-

(a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143;

(b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished;

(c) the income reassessed is greater than the income assessed or reassessed immediately before such re-assessment;

(d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143;

(e) the amount of deemed total income assessed as per the provisions of section 115JB or 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been filed;

(f) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income.

The cases of misreporting of income have been specified as under:

(i) misrepresentation or suppression of facts;

(ii) non-recording of investments in books of account;

(iii) claiming of expenditure not substantiated by evidence;

(iv) recording of false entry in books of account;

(v) failure to record any receipt in books of account having a bearing on total income;

(vi) failure to report any international transaction or deemed international transaction under Chapter X.

Under the proposed Section 270A, penalty would be leviable @ 50% of tax in cases involving under reporting of income and in cases involving misreporting of facts, penalty is proposed to be levied @ 200% of tax. Remission of penalty is also proposed in certain circumstances where taxes are paid and appeal is not filed, in terms of the proposed Section 270AA.

On a reading of the proposed Section 270A, it would seem that, once the concerned Officer is convinced that the said Section is attracted given the circumstances and facts, he has no say in terms of the deciding on the quantum of the penalty to be levied, considering the fact that the word ‘shall’ has been used. This development comes as a rude shock to assessees who are covered by transfer pricing regulations, wherein, during assessment, huge additions to the income declared by the assessee are being made by the Transfer Pricing Officers.

Be that as it may…. the introduction of the proposed Section 270A would seem to be aimed at encouraging the concerned officers to levy huge penalties on the hapless assessees. If levying of penalty is an exception under the current Section 271(1)(c), it could become a rule under the proposed Section 270A.

Budget 2016: An unorthodox budget : 01-03-2016


Macro-economic statistics announced in the Economic Survey raised the bar for Budget FY17 proposals. Finance minister Arun Jaitley has done a fine job in pulling off an all-encompassing and considerate budget, which can boast of elements of tax policy and administration reforms, measures for regulatory overhaul and recalibration of the government’s approach to improvise India’s ‘ease of doing business’ rating.

Budget proposals are knitted around ‘9 Pillars of Transformative Agenda’ set out by the FM, the majority of which cater to the government’s objective of realising inclusive economic growth. On anticipated lines, several policy announcements and large resource allocation for social schemes, agriculture, rural credit, roads and ports that have been made will provide impetus to growth and promote the government’s flagship programmes.

Tax proposals in the budget were an outcome of predictable announcements and progressive policy thinking, aimed at course correction by the tax administration, to treat the taxpayer as a customer. At the policy level, commitment to implementation of general anti-avoidance rules (GAAR) from April 1, 2017, and proposal for implementation of country-by-country transfer-pricing reporting standards signify convergence with global tax policy, in the wake of OECD/G-20-led works on the BEPS initiative. Deferral of PoEM as a test of tax residency of foreign companies in India to April 2017 is a welcome move and shall provide time to gear up to meet this important policy shift.

Similarly, a proposal to bury the bogey of retrospective legislation is welcome and hopefully, the one-time settlement in lieu of payment of taxes with immunity from interest and penalty shall partly undo the damage caused by the 2012 legislation.

The most prominent miss on tax policy front was the absence of a definitive roadmap for Goods & Services Tax (GST). Perhaps, this tax policy reform is best left for the legislature to guide the way forward. Corporate tax for start-ups and MSMEs have been rationalised to 25% and 29%, respectively, though an across-the-board cut in the tax rate will need to wait, given compulsions on the revenue side. The revenue secretary felt that an across-the-board reduction could have meant a burden of R12,000-15,000 crore, which the FM could ill afford. Having said that, he did press the button to phase out tax exemptions largely in line with the draft proposal, except giving an extension to SEZs by April 1, 2020 (instead of April 1, 2017).

The proposal of ‘equalisation levy’ for foreign e-commerce enterprises on B2B transactions is another step towards alignment with action point 1 of post-BEPS policies.

Several proposals to usher in administrative reforms are transformative, if executed well. In particular, the roll-out of the alternate dispute resolution framework can potentially reduce disputes clogging the system and its impact will be felt in the medium- to long-term. A far more simplified scheme for income declaration gives one time compliance opportunity to delinquent taxpayers with an incremental tax cost of 15% over and above the base tax rate of 30%. Rationalisation of quantum of penalty to reasonable range of 50-200% (instead of 100-300%) is yet another progressive reform.

In conclusion, Budget FY17 is an impactful one and sets the tone for course correction, both at the fiscal as well as the regulatory front.

Source : PTI

Why Arun Jaitley’s move to tax EPF withdrawal is morally wrong : 01-03-2016


If there was one budget proposal that set the social mediaon fire, then it was the tax on withdrawal of employeeprovident fund (EPF).

In order to bring parity in tax treatment of various pension plans, Finance Minister Arun Jaitley’s budget has proposed that contribution made on or after April 1, 2016 by an employee participating in a recognised provident fund and superannuation fund, up to 40 per cent of the accumulated balance of such contributions on withdrawal shall be exempt from tax. In other words 60 per cent or the lion’s share of all subsequent contributions will be taxed.

In plain words, this is a morally wrong tax.

First of all the EPF barely earns enough money to beat inflation. They mostly invest in government securities, which give one of the worst yields in the market. So by the time an employee retires, the money he has in hand has roughly the same purchasing power at the time of saving.

Rather than appreciating his effort in nation building and giving him his rightful due, the government now wants to tax him even on his way to his golden years. Little wonder, the government has lost a lot of goodwill by this single act. Nearly six crore people are expected to be affected by this tax.

Presently social security schemes run by retirement fund body EPFO are tax free EEE (exempt-exempt-exempt) schemes. Deposits, interest accruals and withdrawal are tax free under the scheme.  Under the new provision, if the EPF is not used for buying an annuity, then 60 per cent of the employee contribution made post April 1, 2016 will be considered as income and taxed as per the income bracket.

Firstly, there is little logic in making a retiring employee to compulsorily invest in an annuity instrument. He might prefer buying his dream home or start a business from the money saved throughout his working career. Further, retiring employee would need to save all the money he could to meet his medical expenses post retirement. Apart from government employees, few private companies offer medical allowances post retirement. The government cannot decide on where a retiring employee should invest, especially when all through his working career he was forced to invest in a poor instrument called EPFs.

Secondly, if the government wants to tax the EPF, it should allow employees to choose better higher yielding instruments which are tax efficient.

Finally government should have taken a lesson from the failure of NPS (National Pension Scheme) to attract funds. Presently in NPS out of the total corpus, the person needs to buy an annuity plan with the 40 per cent and of the remaining amount 60 per cent will be taxable. Despite being offered an additional deduction of Rs 50,000 under Section 80CCD (1B) few have selected the NPS option.

Rather than correcting a bad instrument like NPS, Jaitley and his team of experts preferred to make all pension plans equally bad. Little wonder there was uproar in the social media with many saying that the government has stabbed salaried employees in the back.

If Pranab Mukherjee as finance minister would be remembered for introducing the retrospective tax, Arun Jaitley will go down in history as a finance minister who made retirement a bad word.

Source : The Hindu

Budget – 2016-17


  1. For new jobs in formal sector: govt will pay 8.33% interest to all new employees enrolling under EPFO.
  2. Tax-free infra bonds to be issues again this year.
  3.  Budget extends coverage of Section 80JJAA  to all audited companies.
  4. Bill to amend Companies Act for easier entry to be introduced in the ongoing sessio of parliment:@arunjaitley #UnionBudget
  5. Union Budget 2016 Relief under Section 87A proposed to be increased from rs 2000 to 5000.
  6. TIOL budget 2016 FM hikes Sec 80GG limit from rs. 24k to 60k + presumptive taxation – turnover limit hiked to rs 2 cr for small businesses.
  7. Celling of tax rebate for tax payers with up to rs. 5lakh annual come to be raised to rs. 5000 from rs. 2000 currently.
  8. Union budget 2016 Presumptive taxation scheme introduced for all professionals with receipts up to rs. 50 lakhs.
  9. New tax regime for new manufacturing Cos. + 100% deduction for Startups for 5 years + no capital gains for startups
  10. Corporate tax regime reform depreciation limited  to 40% +sec 10AA benefit to continue till 2020.
  11. FM proposes withholding tax for ecommerce entities having no PF but earning ad revenue in India.
  12. Rich to pay 10% more tax on dividend exceeding rs. 10lakhs.
  13. Budget 2016 proposes deduction of addl sum of rs. 50000/- for interest payment.
  14. Budget 2016 announces Infrastructure Cess in name of congestion on roads.
  15. Securities Transaction Tax for options and futures hiked.
  16. Withdrawal of 40% corpus tax free for NPS.
  17. 1% tax on luxury goods and cars Infracess of 1% on small cars & 2.5% on diesel cars, says FM in Budget 2016.
  18. Tax Litigation – 3 lakh case involving rs. 5.5 lakh crore Scheme proposed not to levy penalty upto rs. 10 lakh for direct & indirect taxes 20% of minimum assessed sum and penalty also proposed.
  19. Budget 2016 lower corporate tax rates from companies with revenue under rs. 5 cr to 29% + surcharge + cess: FM.
  20. Budget 2016 retrotax – no interest and penalty if case is dropped.
  21. one-time dispute resolution scheme proposed for cases pending in courts  + proposes to reduce powers of AOs to impose penalty.
  22. Retro tax cases – High Level committee headed by Revenue Secretary to decide new cases.

Circular No.1016/4/2016-CX, Dated : 29-02-2016


GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
(CENTRAL BOARD OF EXCISE & CUSTOMS)
NEW DELHI

CIRCULAR NO

1016/4/2016-CX, Dated: February 29, 2016

To

Principal Chief Commissioner / Chief Commissioner of Central Excise (All),
Principal Chief Commissioner / Chief Commissioner of Central Excise and Service Tax (All),
Principal Commissioner of Central Excise, Service Tax (All),
Web-master, CBEC

Subject: Registration of two or more premises as one registrant in Central Excise -reg

Notification No. 36/2001-Central Excise (NT), dated 26.06.2001 has been amended vide Notification No. 19/2016-Central Excise (NT), dated 01.03.2016 to provide that if two or more premises of the same factory are located in a close area, these premises are within the jurisdiction of a Central Excise Range and the process undertaken there are interlinked and the units are not operating under any of the area based exemption notifications, the Commissioner of Central Excise, may, subject to proper accountal of the movement of goods from one premise to other and such other conditions and limitations, as may be prescribed, allow single registration.

2. In light of the above, sub-paragraph (1) of paragraph 3 of Circular No. 586/23/2001-CX dated the 12th September, 2001, and instructions in paragraph 3.2 of Chapter 2 (Registration) of Central Excise Manual of Supplementary Instructions, 2005, stands amended accordingly.

3. This circular shall come into force from 1st of March, 2016. Difficulties faced, if any, in implementation of the Circular may be brought to the notice of the Board. Hindi version follows. The trade, industry and field formations may suitably be informed.

F.No. 96/18/2016-CX.1

(Santosh Kumar Mishra)
Under Secretary to the Government of India

D.O.296/137/2013-CX (CPGRAMS) Pt.III Dated : 26-02-2016


D.O.296/137/2013-CX (CPGRAMS) Pt.III 
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI

Dated: February 26, 2016

To

Dear Chief Commissioner/Director General,

Subject:- Setting up of call center to monitor grievances: -Reg.

Reference is invited to this office letter F.No.296/137/2013-CX.9(CPGRAMS) Pt.VI dated 09.02.2016 wherein directions of Hon’ble Prime Minister regarding timely and quality disposal of grievances were communicated.

2. Subsequently, Secretary (DARPG) held a meeting on 11.02.2016 to highlight expeditious disposal of public grievances pending at various levels on CPGRAMS portal. He emphasized that efforts should be made to remove the root cause of grievances. He also informed that a PG Call Centre has been launched from 12.02.2016 which would make outbound calls right up to last official along the line with whom any particular grievance is pending. The Call cEnter is also mandated to take feedback from the citizen regarding the quality of disposal of grievance. In this context, it is desired that Addl. Secretary/Joint Secretary in each department should review 10 disposed grievances and 5 pending grievances each day to assess the time taken for disposal as well as the quality; of redress.

3. Taking note of the importance being given to grievance redress, it is desired that Chief Commissioners/Director Generals should review 10 grievances & Pr. Commissioner/Commissioner should review 20-30 grievances every week.

4. The mechanism of grievance redress by CBEC and its offices has received adverse comments recently. It is, therefore, incumbent on each one of us to ensure that all grievances are redressed in a timely and effective manner.

(Neerja Shah)
Special Secretary & Member

Notification No. : 10/2016 Dated: 26-2-2016


Amendments in Notification No. 59/2015 dated the 6th of July, 2015 – 10/2016 – Dated 26-2-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(Central Board of Direct Taxes)

NOTIFICATION No. 10/2016

New Delhi, the 26th February, 2016

S.O. 613(E).- In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of section 10 of theIncome-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following further amendments in thenotification of the Government of India in the Ministry of Finance (Department of Revenue), published in the Gazette of India Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 1827(E), dated the 6th of July, 2015, namely :-

In the said notification, -

(a) for paragraph 6, the following paragraph shall be substituted, namely:-

“6. Public issue.- (i) Seventy percent. of the aggregated amount of bonds issued by each entity in the TABLE shall be raised through public issue;

(ii) Forty per cent. of public issue under sub-paragraph (i) shall be earmarked for RII’s:

Provided that the words “Forty per cent.” referred to in sub-paragraph (ii) shall be read as “sixty per cent.” for the purposes of the entities at serial numbers 2(b) and 8 of the TABLE.”;

(b) in paragraph 9, in the TABLE, for serial number 2 and the entries relating thereto, the following shall be substituted, namely:-

SL. No.

Entities

Allocated amount of bonds ( in crore)

(1)

(2)

(3)

“2. Indian Railway Finance Corporation Limited (IRFC)  
                                                  (a) TRANCHE I 6000
                                                  (b) TRANCHE II 3500”.

[F.No.178/ 1 /2016-ITA-I]

DEEPSHIKHA SHARMA, Director

Note:- The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 1827(E) dated the 6th of July, 2015 and subsequently amended vide notification number S.O. 520(E), dated the 18th February, 2016.

Notification No. : 9/2016 Dated: 25-2-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies Madhya Pradesh State AIDS Control Society a body constituted by the Government of Madhya Pradesh in respect of the following specified income arising to that Society – 9/2016 – Dated 25-2-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 09/2016

New Delhi, the 25th February, 2016

S.O. 595(E).- In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purposes of the said clause, the Madhya Pradesh State AIDS Control Society a body constituted by the Government of Madhya Pradesh in respect of the following specified income arising to that Society, namely:-

(a) amount received in the form of grants-in-aid from the

Government of India; and

(b) interest earned on such grants-in-aid.

2. This notification shall be deemed to apply for the period 01.06.2011 to 31.03.2013 and shall apply with respect to the Financial Years 2013-14, 2014-15 and 2015-16.

3. The notification shall be effective subject to the following conditions, namely:-

(a) the Madhya Pradesh State AIDS Control Society does not engage in any commercial activity;

(b) the activities and the nature of the specified income of the Madhya Pradesh State AIDS Control Society remain unchanged throughout the financial year; and

(c) the Madhya Pradesh State AIDS Control Society files return of income in accordance with the provision of clause (g) of sub-section (4C) section 139 of the Income-tax Act, 1961.

4. The grants received by the society shall be received and applied in accordance with the prevailing rules and regulations.

[F. No. 196/73/2012-ITA.I]

DEEPSHIKHA SHARMA, Director

Jaitley to meet economists two days before Budget : 25-02-2016


The finance ministry has called for a meeting with economists just two days before the Budget is presented in Parliament. The timing of the meeting is quite unprecedented in Indian public finance but is more in line with the degree of openness demonstrated by the ministry in the run-up to the Budget this year.

Two economists with knowledge of the development said they were surprised with the call, since no agenda had been circulated for the meeting. Finance minister Arun Jaitley and his team, including junior finance minister Jayant Sinha would take part in the meeting. But it is unlikely that any inputs from the meeting can be used by the ministry to change anything in the Budget, including the crucial numbers like fiscal and revenue deficit, as there will be no time from there on to the Budget, which will be tabled in the Lok Sabha at 11 am on Monday.
Read our full coverage on Union Budget 2016

The finance minister has already met the economists as part of his round of pre-Budget meetings in January.

In those meetings, he also met trade unions, industrial leaders, bankers, and farmers.

The timing of the meeting is significant as it comes just a day after the finance ministry will release the Economic Survey for 2015-16. In recent years, the Chief Economic Advisor as the author of the survey meets the media after the survey is tabled in Parliament.

The government faces a huge fiscal pressure this year in the framing of the Budget. In the wake of the weakness in the global economy, the Indian economy has no growth support to expect from abroad. The three consecutive crop failures has on top of this dampened the domestic demand, making it hard for the industrial sector to invest in additional capacity.

The key metric that will be watched out will be the deficit figures to indicate if the Indian government plans to expand public investment by borrowing more. Yet, as the government debt papers both from the Centre and states have become quite sought after in international debt markets, any change in their numbers will create an impact on the returns for banks and foreign institutional investors who hold those papers.

Source : The Economic Times

No. Minutes of the 69th meeting of the SEZ Dated: 23-2-2016


Minutes of the 69th meeting of the Board of Approval for SEZs held on 23rd February 2016 to consider proposals for setting up Special Economic Zones and other miscellaneous proposals – Dated 23-2-2016 – SEZ

 

The Sixty ninth (69th) meeting of the Board of Approval (BoA) for Special Economic  Zones (SEZs)  was  held  on 23rd  February, 2016 under  the  Chairpersonship of Ms. Rita Teaotia, Secretary, Department of Commerce, at 3.30 P.M. in Room No. 47, Udyog Bhawan, New Delhi to consider the proposals in respect of notified/approved SEZs. The list of participants is Annexed (Annexure-1).

Item No. 69.1: Requests for extension of validity of formal approvals

(i)  Request of M/s. Newfound Properties and Leasing Private Limited for further extension of the validity period of formal approval, granted for setting up of sector specific  SEZ  for  IT/ITES  at Juinagar, District Thane, Maharashtra, beyond 20t” August 2014

The Board, after deliberations, condoned the delay and extended the validity of the  formal approval up to 31st December, 2016.

(ii)  Request of M/s. Indus Gene Expression Ltd. for further extension of the validity period of formal approval, granted for setting up of sector specific SEZ for Biotech and related activities at Kodur and Settipalli villages, Chilamathur Mandal, Anantapur  District, Andhra Pradesh, beyond 13th February, 2016

The Board, after deliberations, extended the validity of the formal approval up to 13th February, 2017.

(iii)  Request of M/s. Gopalpur Special Economic Zone Ltd. for further extension of  validity period of its formal approval for setting up a multi product SEZ at Gopalpur,  District Ganjam, Odisha beyond 17th December, 2015

The Resident Commissioner, Odisha Government clarified that the State Government has already registered 500 Ha. of land in favour of Tata Steel SEZ Ltd. and State Government is committed to register the balance 673 Ha. of land in favour of Tata Steel SEZ Ltd. The BOA directed DC Falta SEZ to coordinate with the State Government in this regard. Further, Board of Approval agreed to extend the formal approval of M/s. Gopalpur Special Economic Zone Ltd. up to 17.12.2016 and process the notification for 500 Ha. of land on file for approval.

(iv)  Request of M/s Kandla Port Trust, developer of multi product SEZ at Kandla and Tuna, Gujarat for further extension of the validity period of formal approval, beyond 6th May 2016

The Board, after deliberations, extended the validity of the formal approval up to 6th May, 2017.

(v) Request of M/s. Saraf Agencies Private Ltd. for extension of the validity period of formal approval, granted for setting up of sector specific SEZ for Mineral based Industries at Chhatrapur, District Ganjam, Odisha, beyond 26th February 2016

The Board, after deliberations, extended the validity of the formal approval up to 26th February, 2017.

(vi)  Request of M/s. G.P. Realtors Private Limited for further extension of the validity period of formal approval, granted for setting up of sector specific SEZ for Electronic  Hardware  & IT/ITES  at village Behrampur, Bandhwari and Balola, Gurgaon, Haryana, beyond 25th January, 2016

The Board, after deliberations, extended the validity of the formal approval up to 25th January, 2017.

Item No. 69.2 : Requests for extension of LoP beyond 3rd Year onwards

(i)  Request of M/s Kusum Healthcare Pvt. Ltd., a unit in Indore SEZ for extension of validity period of its LoP beyond 28th February 2016

The Board, after deliberations, extended the validity of the LoP up to 28th February, 2017.

(ii)  Request of M/s. Innovations & Technologies Pvt. Ltd., a unit in MIDC SEZ at  Rajiv Infotech Park, Hinjewadi, Phase-III, Pune, Maharashtra for extension of validity  period of its LoP beyond 8th January 2015

The Board, after deliberations, condoned the delay and extended the validity of the LoP up to 8th January, 2017.

Item No. 69.3: Requests for co-developer

(a)  In the 65th BoA meeting it was decided to approve co-developer proposals, subject to standard terms and conditions as per SEZ Act and Rules provided that the lease period is reduced to a period not exceeding 30 years (Renewable). Subsequently, in the 66th BOA meeting held on 27.8.2015, based on a reference received from the Government of Kerala, it was decided that in respect of the SEZ projects located in the State of Kerala the lease period would be as per the lease agreement signed between the Developer and Co-developer and in all other cases the lease period will continue to be a period not exceeding 30 years (Renewable).

Approval of proposals for Co-developer

All approvals for co-developers are subject to the condition that particular terms and conditions of lease agreement/co-developer agreement will not have any bearing on the treatment of the income by way of lease rentals/down payment/premium etc., for the purposes of assessment under the Income Tax Act and Rules. The Assessing Officer, will have the right to examine the taxability of these amounts under the SEZ Act and Income Tax Act and Rules. This is applicable to all cases of co-developers approved by the BoA in this meeting. The decisions of the BoA on the proposals listed in the agenda are as under.–

(i) Request of M/s. HCL Technologies Limited   for co-developer in the sector specific SEZ for IT/ITES at Madurai Ilandaikulam, Tamil Nadu, being developed by M/s. Electronics Corporation of Tamil Nadu Limited

After deliberations, the Board approved the proposal of M/s. HCL Technologies Limited for co-developer to develop operate and maintain IT/ITES to provide for 24 hrs uninterrupted power supply, central air conditioning, over an area of 6.75 acres in accordance with the co-developer agreement entered into with the developer, subject to standard terms and conditions as per SEZ Act and Rules provided that the lease period is reduced to a period not exceeding 30 years (Renewable).

(ii)  Request of M/s. SJ Contracts Pvt. Ltd. for co-developer in the sector specific SEZ  for  Biotech  at  village  Mahiri,  Budruck,  Taluka  Haveli,  District  Pune, Maharashtra, being developed by M/s. SEZ Biotech Services Pvt. Ltd.

The matter had come up before 66th BOA and after deliberations, the Board had directed to DC, SEEPZ to discuss the matter with the client for understanding the business model of the applicant. After considering the inputs of DC SEEPZ SEZ, the Board rejected the proposal, as the co- developer is working as a contractor and not as a co-developer.

Item No. 69.4: Proposals for setting up of SEZs

(i)  Request of M/s. Cognizant Technologies Services Private Limited for setting up of a sector specific SEZ for IT/ITES at Nanakramguda village, Serilingampally Mandal, Ranga Reddy District, Telangana, over an area of 2.5161 hectares.

The Board noted that the Developer is in possession of the land. The Government of Telangana had  also recommended the proposal vide their letter dated 30.11.2015.  Accordingly, the Board decided to grant formal approval to the proposal of M/s. Cognizant Technologies Services Private Limited, for setting up of a sector specific Special Economic Zone for IT/ITES at Nanakramguda village, Serilingampally Mandal, Ranga Reddy District, Telangana, over an area of 2.5161 hectares.

Item No. 69.5 : Miscellaneous cases

(i) Request of UP State Industrial Development Corporation Ltd. (UPSIDC) for conversion of existing handicrafts SEZ, Moradabad to (i) Textile.and its broad-banded products (ii) broad   banded   IT/ITES/Electronic   Components  &  Hardware manufacturing sector specific SEZ and (iii) Handicraft broad-banded with engineering sector SEZ.

The Board approved conversion of in-principle approval into formal approval and notification to the proposal of M/s. UP State Industrial Development Corporation Ltd. (UPSIDC), for conversion of existing handicrafts SEZ, Moradabad to (i) Textile and its broad-banded products (ii) broad banded IT/ITES/Electronic Components & Hardware  manufacturing sector specific SEZ and (iii) Handicraft broad-banded with engineering sector SEZ.

(ii) Request of M/s. Adani Ports & SEZ Ltd. developer for clubbing of three notified SEZs in Mundra, Kutch, Gujarat.

After deliberations, the Board approved the proposal of M/s. Adani Ports & SEZ Limited for clubbing of APSEZL-I (Multi product) and APSEZL-II (FTWZ) with APSEZLIII (Multi product) subject to contiguity being maintained. The Board also directed DC, APSEZ to carry out fresh demarcation of processing and non-processing area.

(iii)  Request  of M/s.  Telangana Industrial Infrastructure Corporation Limited (TSIIC), developer of sector specific SEZ for Biotechnology at Lalgadi Malakpet Village, Shameerpet Mandal, Ranga Reddy District, Telangana for increase in area of  its SEZ

The Board, after deliberations, approved the request of M/s. Telangana Industrial  Infrastructure Corporation Limited (TSIIC) for addition of an area of 2.136 hectares, increasing the total area of the SEZ to 22.576 hectares, subject to contiguity of the land in the SEZ being maintained.

Item No. 69.6 : Appeals before BoA

(i) Appeal of M/s. Robinson International Pvt. Ltd., a unit in FSEZ against order dated 25″i May, 2015 of the Development Commissioner FSEZ/UAC

The Board heard the appellant and directed them to pay/clear the rental dues latest by 31st March, 2016 and if the exact amount is deposited, LoP can be extended for one year.

Decision on Supplementary Agenda

Item No. 69.7 : Requests for extension of validity of formal approvals

(i)  Request of M/s. Mahindra World City (Jaipur) Ltd. for further extension of the validity period of formal approval, granted for setting up of sector specific SEZ for Gems & Jewellery at Village Kalwara, Tehsil Sanganer, District Jaipur, Rajasthan,  beyond 1st February, 2016

The Board, after deliberations, extended the validity of the formal approval up to 1st February, 2017.

(ii)  Request of M/s. Kumar Builders Township Ventures Pvt. Ltd. for further extension of the validity period of formal approval, granted for setting up of sector specific SEZ for IT/ITES at Village Hinjewadi & Mann, Taluka – Mulshi, Pune, Maharashtra, beyond 27th August 2014

The Board, after deliberations, condoned the delay and extended the validity of the formal approval up to 27th August, 2017 and also directed that the approval would be  cancelled in case the project is not implemented by that time.

Item No. 69.8 : Requests for extension of LoP beyond 3rd Year onwards

(i)  Request of M/s. Zydus Technologies Ltd., a unit in Zydus Pharma SEZ at Ahmedabad, Gujarat for extension of validity period of its LoP beyond 28th June 2016

The Board, after deliberations, extended the validity of the LoP up to 28th  June, 2017.

(ii)  Request of M/s. Anushakti Specialities LLP, a unit in the multi product SEZ  being developed by M/s. Dahej SEZ at Bharuch, Gujarat for extension of LoP beyond 13th  March 2016

The Board, after deliberations, extended the validity of the LoP by a period of six months up to 13th  September, 2016.

Item No. 69.9 : Requests for co-developer

(i)  Request of M/s. Adani International Container Terminal Pvt. Ltd. (AICTPL) a  co-developer in the multi-product SEZ at Mundra, Kutch, Gujarat, being developed by  M/s. Adani Ports and Special Economic Zone Ltd. for additional authorized operations

(ii)  Request of M/s. Adani LPG Terminal Pvt. Ltd. for co-developer status in the multi-product SEZ atMundra, Kutch, Gujarat, being developed by M/s. Adani Port  and Special Economic Zone Ltd. along with specific authorized operations

(iii)  Request of M/s. Adani CMA Mundra Terminal Pvt. Ltd. for co-developer in the multi-product SEZ at Mundra, Kutch, Gujarat, being developed by M/s. Adani Port and Special Economic Zone Ltd along with specific authorized operations

The Board considered the above three proposals in detail. The Board took into account the following facts:

(i)  Section 2(p) of the SEZ Act, 2005 provides that “infrastructure facilities” means  industrial, commercial or social infrastructure or other facilities necessary for the development of a Special Economic Zone.

(ii)  Rule 2(1)(s) of the SEZ Rules, 2006 provides that “infrastructure” means facilities  needed for development, operation and maintenance of a Special Economic Zone.

(iii) The Department of Revenue has informed that in case of APSEZ, the SEZ bound   cargo was only 5.74% of the total cargo handled by the Port in the existing two   container terminals (CT-2 and CT-3) in 2014-15. The corresponding figure for April  - November, 2015 is 6.06%.  The installed capacity of the container jetties is 2.1 million TEUs. In respect of LPG terminal also the Developer in its presentation has explained that this facility is for catering to the customers in DTA.  Hence, this facility is also essentially meant for DTA.  During the meeting, the DC, APSEZ further informed that in respect of these two proposed container terminal facilities, the Developer has already carried out construction activities.

(iv)  When the authorised operations for these SEZs were approved by the BoA in 2004   and when it was conveyed to the Developer vide letter No. F.2(11)/2003-EPZ dated   8th December, 2004, this letter categorically records that “On a query, the  representative of Mundra SEZ clarified that the proposal is for providing infrastructure facilities including for seed crushing units, floor milling industry, steel processing units, integrated coach factory, auto exports etc.” This conclusively establishes that when the authorised activities, namely, enhancing Port facilities, container terminals enhancement etc. were approved by the BoA in 2004, BoA had taken into account the need and necessity of the infrastructure proposed in these SEZs, as promised by the Developer. However, subsequent developments in the SEZs have belied the affirmation made by the Developer and as seen from the facts, as in sub-paragraph (iii) above, the facilities which have already been created are being utilised for SEZ only to the extent of 5.74% and rest of the facilities created in the SEZ are being used for Domestic Tariff Area (DTA). Hence, there is no need and necessity established for creating any additional facilities in the SEZ.

(v)   Since this is an economic proposal involving huge investment, the Department of   Commerce also decided to seek opinion of the Solicitor General of India.  The   Solicitor General of India, in his opinion dated 17th February, 2016, has also  categorically clarified as under:

“Thus, the question of duty benefits on CAPEX as well as O&M or either one of them does not arise as the purport of the SEZ Act is to provide duty benefits in respect of infrastructure facilities within SEZ to only those facilities which are necessary for the development of the SEZ.”

2. In view of the above stated facts, BoA decided as follows:

(i) BoA does not approve all these three proposals of Co-Developers.

(ii) Since these additional facilities are not needed and not necessary for the SEZ, these facilities cannot be developed by the Developer as well and accordingly, no duty free benefits on CAPEX as well as O&M will be admissible.

(iii)  In the event the Developer wants to develop these facilities without taking any duty  free benefits and without taking income-tax benefits, as admissible under the SEZ Act, it shall be free to do so.

(iv)  Request of M/s. Wockhardt Ltd. a co-developer in the sector specific SEZ for  Pharmaceuticals at Shendre, Aurangabad District, Maharashtra, being developed by  M/s. Wockhardt Infrastructure Development Ltd. for expansion of scope of existing  activity

After deliberations, the Board approved the proposal of M/s. Wockhardt Ltd. for expansion of scope of existing activity, in accordance with the co-developer agreement entered into with the developer subject to standard tenors and conditions as per SEZ Act and Rules provided the lease period is for a period of 30 years (renewable).

The developer has granted consent to M/s. Wockhardt Ltd. to become a co-developer for the following activities are below:-

1. Central utility

(i) Utility block and distribution network

(ii) Steam generation plant and chimney

(iii)  Clean steam generation and supply system Chilled water generation and   pumping system

(iv)  Cooling water generation and pumping system

(v)   Water for Injection (WFI) generation and pumping system

(vi)  Dernineralized water generation and pumping system

(vii) Purified water generation and pumping system

(viii) Compressed Air system

2.  Heating ventilation & Air conditioning system.

Item No. 69.10: Proposals for setting up of SEZs

(i)  Request of M/s. Saltire Developers Private Limited for setting up of a sector specific  SEZ for IT/ITES at Outer Ring Road, Rachanahalli Village, Nagavara, Bangalore, Karnataka, over an area of 4.05 hectares.

The Board noted that the Developer is in possession of the land. The Government of Karnataka had  also recommended the proposal  vide their letter dated 22.02.2016.  Accordingly, the Board decided to grant formal approval to the proposal of M/s. Saltire Developers Private Limited, for setting up of a sector specific Special Economic Zone for IT/ITES at Outer Ring Road, Rachanahalli Village, Nagavara, Bangalore, Karnataka, over an area of 4.05 hectares.

(ii)  Request of M/s. Amin Properties LLP for setting up of a sector specific SEZ for IT/ITES at Pujanahalli Village, Devanahalli Taluk, Bangalore, Karnataka, over an area of 2.76 hectares.

The Board noted that the Developer is in possession of the land. The Government of Karnataka had  also  recommended the proposal  vide their letter dated 22.02.2016. Accordingly, the Board decided to grant formal approval to the proposal of M/s. Amin Properties LLP, for setting up of a sector specific Special Economic Zone for IT/ITES at Pujanahalli Village, Devanahalli Taluk, Bangalore, Karnataka, over an area of 2.76 hectares.

(iii) Request of M/s. Infosys Limited for setting up of a sector specific SEZ for IT/ITES at Plot No. 1-3, IT City, Sector 83, Alpha, SAS Nagar, Mohali, over an area of 20.234 hectares.

The Board noted that the Developer is in possession of the land. The Government of Punjab had also recommended the proposal vide their letter dated 11.07.2014. Accordingly, the Board decided to grant formal approval to the proposal of M/s. Infosys Limited, for setting up of a sector specific Special Economic Zone for IT/ITES at Plot No. 1-3, IT City, Sector 83, Alpha, SAS Nagar, Mohali, over an area of 20.234 hectares.

Item No. 69.11 : Miscellaneous Cases

(i)  Request of M/s. Tech Mahindra Limited (formerly M/s. Satyam Computer Services  Limited),  a  co-developer  in the  sector  specific SEZ for IT/ITES at Kancheepuram, Chennai, Tamil Nadu, being developed by Electronic Corporation of  Tamil Nadu Limited (ELCOT) for authorized operations.

The Board, after deliberations, approved the following authorized activities of the co-developer subject to the condition that the facility developed would be deemed to be non-processing area and also that no O&M benefits would be available for the same.

S. No. Name of the activity No. of units Area per unit (in sqm) as per FSI /FAR norms as applicable Total area (in sqm)
1 Construction of Guest  House/Dormitories 160 rooms in ground + 3 floors NA 9289.36

(ii) Request of M/s Gujarat Industrial Development Corporation (GIDC), for allocation of 5.00 mtr wide corridor through SEZ area at Dahej SEZ for laying pipelines carrying  treated effluent from 40 MLD CETP of Dahej

The Board, after deliberations, approved allocation of 5.00 mtr wide corridor through SEZ area at Dahej SEZ for laying pipelines carrying treated effluent from 40 MLD CETP of Dahej as proposed by M/s. Gujarat Industrial Development Corporation (GIDC), subject to the condition that duty benefits shall not be available to GIDC for the activity.

(iii)  Request of M/s. Indiabulls Industrial Infrastructure Limited, for relaxation of the contiguity of the multi product SEZ at Sinnar MIDC area, Village Musalgaon and  Gulvanch, Taluka Sinnar, District Nasik, Maharashtra

The Board, after deliberations, approved the proposal of M/s. Indiabulls Industrial Limited with direction that the developer should establish contiguity in the SEZ by constructing an underpass/over bridge for the Phase-I and Phase-11 within a period of 3 years. In case the contiguity is not established by then, de-notification would be initiated and units of SEZ will be restricted only to Phase-I.

(iv)  Request of M/s. Gigaplex Estate Pvt. Ltd. the developer of sector specific SEZ for IT/ITES at MIDC – TTC, Airoli Knowledge Park, Navi Mumbai, District Thane,  Maharashtra for change in shareholding pattern

After deliberations, the Board approved the request for change in shareholding pattern, subject to following conditions:-

(i) Seamless  continuity of the SEZ activities with unaltered responsibilities and obligations for the altered developer entity;

(ii) Fulfillment of all eligibility criteria applicable to developers, including security   clearances etc., by the altered developer entity and its constituents;

(iii) Applicability of and compliance with all Revenue / Company Affairs /SEBI etc. rules   which regulate issues like capital gains, equity change, transfer, taxability etc.

(iv) Full financial details relating to change in equity/merger, demerger, amalgamation or   transfer in ownership etc. shall be furnished immediately to Member (IT), CBDT,   Department of Revenue and to the jurisdictional Authority.

(v) The Assessing Officer shall have the right to assess the taxability of the gain/loss   arising out of the transfer of equity or merger, demerger, amalgamation, transfer and   ownerships etc. as may be applicable and eligibility for deduction under relevant   sections of the Income Tax Act, 1961.

(vi) The applicant shall comply with relevant State Government laws, including those  relating to lease of land, as applicable.

(vii) The developer shall furnish details of PAN and jurisdictional assessing officer of the   developer to CBDT.

(v) Proposal of M/s Plastic Processors & Exporters Pvt. Ltd. for reconsideration of request for extension of LoA.

After deliberations, in view of the provisions of Rule  18(4) of the SEZ Rules, the Board granted approval for revival and renewal of LoP of M/s. Plastic Processors & Exporters Pvt. Ltd. a unit in NSEZ dealing in business of recycling of plastic in SEZ for a period of five years, beyond 30.11.2013 subject to the conditions:-

(i)   That they will pay rental arrears till date with interest.

(ii)  All conditions stipulated as per DoC’s policy Guidelines of 17th Sept, 2013   are to be made applicable while granting such approval.

(iii) Since the unit is not functional and only two years remain in the current LoP,   the export obligation for this period would be as per DoC Policy guidelines  No. 0.6/10/2009-SEZ dated 17.09.2013 for the first and second year.  Any   violation of the above prescribed Minimum Physical Export Obligation at the   end of  2nd year would lead to imposition of penalty and cancellation of the   unit’s LOP.

(iv) As per Rule 18(4)(b) of the SEZ Rules, no approval for enhancement of the approved import quantum of plastic waste and scrap beyond the average  annual import quantum of the unit since its commencement of operation shall  be granted.;

(v)   The authorized operations may be restricted to the unit to carry out the   business of recycling of plastic.

(vi)  Proposal of M/s. MMG Impex, a unit in MEPZ to reconsider the proposal for manufacture of additional items of sandalwoods.

The BoA, after deliberations, has approved for the manufacturing of sandalwood handicraft products and sandalwood machine made products which are restricted items. Further, the Board has not allowed the manufacturing of (i) Sandalwood chips (upto 50 grams per piece) (ii) Sandalwood powder/dust and (iii) Sandalwood flakes/scrap/waste as these are prohibited items.  The Board directed DC, MEPZ to seek reports from Ministry of Environment, Forests & Climate Change and DGFT on the prohibited items.

(vii)   Clarification /instruction to be issued regarding Rule 74A of SEZ Rules,  2006.

The Joint Secretary (GPM) explained to the Board that representations have been received on the applicability ofRule 74A of SEZ Rules,  2006 in cases where the operational SEZ units continue to operate as such, i.e. on a going concern basis as a result of change of name, court approved mergers/ de-mergers, slump sale, change of constitution from proprietorship to partnership & vice-versa, change of constitution from public limited company to private/ limited liability company & vice-versa, company to partnership & vice-versa, change in shareholding up to 50 per cent, etc. and per se are not opting out/ exiting out of the SEZ scheme.

With a view to promote the ease of doing business in India and that restructuring of entity/ business is a fairly common occurrence, BOA decided that provisions of Rule 74A shall not apply to SEZ Units that do not exit or opt out of the SEZ Scheme by transferring its assets and liabilities to another person and the SEZ Unit continues to operate as a going concern in the situations mentioned above.  The UACs concerned, may consider such  requests under Rule 19(2) of the SEZ Rules, 2006.

In so far as Business Transfer Agreement is concerned, it was explained that certain acquisitions happen globally as a result of Business Transfer Agreement which result in transfer of the SEZ unit of the Indian company on a going concern basis to the acquirer. The BOA decided that such cases resulting in change of ownership would be decided on merits by the Board of Approvals on a case to case basis.

Item No. 69.12 : Appeals before BoA

(i) Appeal of M/s. Regal Jewellery Mfg. Co., a unit in NSEZ against order dated 18th  January, 2016 passed by UAC, NSEZ.

The Board heard the Appellant who informed that he was paying lease rental regularly even though the lease deed was not executed. This appears to be an oversight on the part of NSEZ and cannot be held against the Appellant.  Hence the BOA upheld the appeal and decided to cancel NSEZ letter dated 18.01.2016 passed by UAC, NSEZ.

(ii)  Appeal of M/s. Singhvi Tradelink LLP (formerly M/s. Singhvi Tradelink Private Limited), a unit in KASEZ against order dated 7th  January, 2016 passed by UAC

The Board heard the Appellant and observed that the activity proposed by the Appellant falls under the restriction imposed by Rule 18(4) of the SEZ Rules, 2006. Hence BOA rejected the appeal.

Decision on Table Agenda

(i)  Request of M/s. Ford Motor Private Limited (FMPL) for co-developer in the sector  specific  SEZ  for  IT/ITES  at  Sholinganallur  village,  Tambaram Taluk, Kancheepuram District, Tamil Nadu, being developed by M/s. Electronics Corporation of Tamil Nadu Limited (ELCOT)

After deliberations, the Board approved the proposal of M/s. Ford Motor Private Limited (FMPL) as Co-developer for developing IT/ITES services related to the automotive, finance and allied sectors including setting up of Ford’s Global Technology and Business Center which will amongst other things, house a research and development and product testing center with modem testing facilities, over an area of 28 acres in accordance with the co-developer agreement entered into with the developer, subject to standard terms and conditions as per SEZ Act and Rules provided that the lease period is reduced to a period of 30 years (Renewable).

Annexure    I

List of Participants for the Meeting of the Board of Approval for Special Economic Zones  held on  23rd  February,  2016  under the Chairpersonship of Commerce Secretary,  Department of Commerce

1. Ms. Rita Teaotia, Chairpersonship, BoA & Commerce Secretary, Department of Commerce

2.  Shri John Joseph, DGEP, Department of Revenue, Ministry of Finance

3. Shri Jitendra Kumar, Additional Dir, DGEP

4. Dr. Tajpal Singh, Additional Dir, DGRP

5. Ms. Gunjan Vaishney, Under Secretary (ITA-1), CBDT, Department of Revenue, Ministry  of Finance

6.  Shri K. Biswal, Joint Secretary & Legislative Counsel, M/o of Law & Justice, Legislative Department, Government of India

7.  Shri Krishna Mohan Arya, Assistant Legal Adviser M/o Law & Justice Department of  Legal Affairs.

8. Shri A.K. Misra, Research Assistant TCPO, Ministry of Urban Development, Vikas  Bhawan, I.P. Estate, New Delhi

9. Shri Rajiv Malik, Assistant Resident Commissioner, Govt. of Maharashtra

10. Dr. Rakesh A.R. TCPO M/o UD Govt. of India

11. Shri Subhash Sharma, O.S.D., Govt. of Chhattisgarh

12. Shri Dinesh Pahadia, AGM   RIICO Government

13. Ms. B. Uma Maheshwar, Project Manager, TSIIC, Telangana

14. Shri R. Krishna Murthy, General Manager, TSIIC,

15. Shri Mukesh Singh Kush, UPSIDC, Moradabad

16. Shri Rajender T Sharma, O/o STP, Gurgaon, STP (HQ) Chandigarh

17. Shri Sanjeeb Kumar Mishra, Resident Commissioner, Odisha

18. Shri Ishwar Singh Yadav, Asstt. Director, O/o DIC

19. Dr. S.K. Sahoo, Deputy Director (EP), O/o DC(MSME), M/o MSME, Nirman Bhawan,  New Delhi.

20. Smt. Shiela Tirkey, Section Officer, Ministry of Commerce & Industry, Department of   Industrial Policy & Promotion.

21. Shri Alok Mukhepadhyay. Consultancies, DIPP.

LIST OF DEVELOPMENT COMMISSIONERS

22. Dr. L.B. Singhal, Development Commissioner, Noida SEZ

23. Dr. Safeena AN, Development Commissioner, CSEZ

24. Shri A.K. Choudhary, Development Commissioner, Sri City SEZ

25. Shri Upendra Vashisht, Development Commissioner, KASEZ

26. Shri Sanjeev Nandwani, Development Commissioner, FSEZ

27. Ms. Sobhana K.S. Rao, Development Commissioner, VSEZ

28. Shri M.K. Shanmuga Sundaram, Development Commissioner, MEPZ-SEZ

29. Shri K.L. Sharma, Development Commissioner, AP&SEZ, Mundra, Gujarat

30. Smt. Lata Shukla, Development Commissioner, Navi Mumbai SEZ

31. Shri Ishwar Singh, Joint Development Commissioner, Indore SEZ

32. Shri Shri N.P.S. Monga, Development Commissioner, SEEPZ SEZ

33. Shri Vijay Shewale, Development Commissioner, Mangalore SEZ

LIST OF PARTICIPANTS FROM DEPARTMENT OF COMMERCE

34. Dr. Guruprasad Mohapatra, Joint Secretary, Department of Commerce

35. Shri T.V. Ravi, Director, Department of Commerce

36. Shri Kabiraj Sabar, Under Secretary, Department of Commerce

37. Shri G. Srinivasan, Under Secretary, Department of Commerce

38. Shri K.C. Biswal, Section Officer, Department of Commerce

39. Shri Piyush, Section Officer, Department of Commerce

Notification No. : 8/2016 Dated: 19-2-2016


Section 10(46) of the Income-tax Act, 1961 Central Government notifies Competition Commission of India , a Commission established under sub-section (1) of section 7 of the Competition Act, 2002 (12 of 2003), in respect of the certain specified income arising to the said Commission – 8/2016 – Dated 19-2-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 8/2016

New Delhi, the 19th February, 2016

S. O. 530(E).- In exercise of the powers conferred by clause (46) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies for the purpose of the said clause, the Competition Commission of India, a Commission established under sub-section (1) of section 7 of the Competition Act, 2002 (12 of 2003), in respect of the following specified income arising to the said Commission, namely:-

(a) amount received in the form of Government grants;

(b) fees received under the Competition Act, 2002; and

(c) interest accrued on Government grants and interest accrued on fees received under the Competition Act, 2002.

2. This notification shall be effective subject to the following conditions, namely:-

(i) the Competition Commission of India does not engage in any commercial activity;

(ii) the activities and the nature of the specified income of the Competition Commission of India shall remain unchanged throughout the financial years; and

(iii) the Competition Commission of India shall file return of income in accordance with clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

3.  This notification shall be applicable for the specified income of the Competition Commission of India for the financial years 2016-2017 to 2020-2021.

[ F.No.196/32/2014-ITA-I] 

DEEPSHIKHA SHARMA, Director

Notifiaction No. 06/2016 Dated :18-2-2016


Amendments in Notification No. 59/2015 dated the 6th of July, 2015 – Authorised entities under Section 10(15)(iv)(h) of the Income Tax Act, 1961 – To issue tax-free, secured, redeemable, non-convertible bonds – 6/2016 – Dated 18-2-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 6/2016

New Delhi, the 18th February, 2016

S.O. 520(E).-In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of section 10 of theIncome-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following amendments in thenotification of the Government of India in the Ministry of Finance (Department of Revenue), published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 1827(E), dated the 6th of July, 2015, namely :-

In the said notification,-

(a) in paragraph 6, after sub-paragraph (ii), the following proviso shall be inserted, namely:- “Provided that the National Bank for Agriculture and Rural Development shall ear mark sixty per cent of such public issue under sub-paragraph (ii) for RIIs.”

(b) in paragraph 9, in the TABLE,-

(i)  for serial number 1 and entries relating thereto, the following serial number and entries shall be substituted, namely:-

Sl. No. Entities Allocated amount of bonds ( in crore)

(1)

(2)

(3)

“1 National Highways Authority of India (NHAI) 19000”;

(ii) after serial  number 7 and entries relating thereto, the following serial number and entries shall be inserted, namely:-

Sl. No. Entities Allocated amount of bonds ( in crore)

(1)

(2)

(3)

“8 National Bank for Agriculture and Rural Development (NABARD) 5000”.

[F. No.178/ 1/2016-ITA-I]

DEEPSHIKHA SHARMA, Director 

Note:-The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 1827(E) dated the 6th of July, 2015.

F.No.296/51/2012-CX.9 Dated 18-02-2016


F.No.296/51/2012-CX.9
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
NEW DELHI

Dated: February 18, 2016

To

The Director General,
Directorate General of Performance Management,
Customs, Central Excise And Service Tax,
Drum Shape Building, I.P. Bhawan,
I.P. Estate,
New Delhi-110002

Sub: Grant of Commendation Certificate on the occasion of Central Excise Day, 2016-reg.

Please refer the Board meeting held on 18.02.2016 to finalize the names of officers for Grant of Commendation Certificate on the occasion of Central Excise Day, 2016.

2. The Board has decided that the commendation Certificates should be granted to the following officers/staff.

S. No. Name Designation Present posting
1 Shri Joseph Antony Under Secretary AD II, CBEC, New Delhi
2 Shri Bhagwat Prasad Sharma Deputy Commissioner Revision Application Unit
3 Sh. K. Sridhar Superintendent CE, Coimbatore
4 Sh. Ramani Venkatraman -do- CE, Chennai IV
5 Sh. Vijay Prakash Verma -do- CCO, Vadodara Zone
6 Sh. Pulak Kumar Patra -do- CE, Kolkata I
7 Sh. N. Raghuraman -do- S. Tax Audit Bangalore
8 Sh. Rajeev Pandey -do- CE, Lucknow
9 Ms. Maya Utpat -do- Appeals I Pune Zone
10 Sh. Joslyin Dsouza -do- CE, Pune IV
11 MS. Rama Sridharan -do- S Tax (Appeals I) Chennai
12 Sh. R. Srivatsan -do- NACEN, Chennai
13 Sh. E.S. Ramachandran -do- CE Gurgaon I
14 Sh. Bipin Vijayan -do- CE, Thane II
15 Sh. Probir Kumar Sen -do- CE, Shillong
16 Ms. Bhawana S Rajpurkar -do- CE, Vadodara Audit I
17 Ms. Anandi Vijayan AO CE, Mumbai I
18 Ms. Bhagirathi Devi SPS DGCEI, Hqrs, New Delhi
19 Ms. Bharati Subramanian PS DGPM, New Delhi
20 Sh Ramphal Asstt. Section Officer TRU, CBEC, New Delhi
21 Ms. S.Gomathi Devi Inspector CE, Chennai Zone
22 Sh. Ravinder Yadav Intelligence Officer DGCEI, Delhi Zonal Unit
23 Sh. Kishore Babi Sawant TA CCO,CE Mumbai Zone I
24 Sh. Ramesh Chandra Mishra Head Hawaldar CE, Bhubaneshwar II
25 Sh. Rajbir Singh MTS TRU, CBEC, New Delhi

3. The Board also decided that the award of Commendation certificates should be institutionalised and DGPM will be incharge of seeking the proposals from the subordinate/attached offices of CBEC every year. This process may be initiated in January itself so as to have sufficient time for all the formations to send the proposals in time.

4. The list of awardees for this year’s Central Excise Day may also be sent to Directorate of Publicity & Public Relations for inclusion in the print advertisement. The awardees should also be informed immediately so as to enable them to attend the function.

(Hemambika R. Priya)
Commissioner (Coord)

Notification No. : 7/2016 Dated: 19-2-2016


Central Government hereby notifies the Atal Pension Yojana (APY) u/s 80CCD of the Income-tax Act, 1961 – 7/2016 – Dated 19-2-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 7/2016

New Delhi, the 19th February, 2016

Income-tax

S. O. 529(E).- In exercise of the powers conferred by sub-section (1) of section 80CCD of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the ‘Atal Pension Yojana (APY)’ as published in the Gazette of India, Extraordinary, Part I, Section 1, vide number F. No. 16/1/2015-PR dated the 16th October, 2015 as a pension scheme for the purposes of the said  section.

2. This notification shall come into force from the date of its publication in the Official Gazette.

[F.No.173/394/2015-ITA-I] 

DEEPSHIKHA SHARMA, Director

Notifiaction No. 05/2016 Dated :17-2-2016


Income-tax (2nd Amendment), Rules, 2016 – Amendments in Safe Harbour Rules for Specified Domestic Transactions – 5/2016 – Dated 17-2-2016 – Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION No. 05/2016

New Delhi, the 17th February, 2016

INCOME–TAX

S.O. 502(E).-In exercise of the powers conferred by section 92CB, read with section 295 of the Income-tax Act, 1961(43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income tax Rules, 1962, namely:-

1.        (1)  These rules may be called the Income-tax (2nd Amendment), Rules, 2016.

(2)  They shall come into force from the date of their publication in the Official Gazette.

2.        In the Income-tax Rules, 1962 (hereinafter referred to as the said rules), in rule 10THA, after the word “generation,” the word “supply,” shall be inserted.

3.        In the said rules, in rule 10THB, in clause (i), the words “by a generating company” shall be omitted.

4.        In the said rules, in rule 10THC, in sub-rule (2), in the Table, against serial number 1,-

(a) in column 2, for the words, brackets, figures and letters “in item (i), (ii) or (iii) of rule THB, as the case may be”, the words, brackets, figures and letters “in clause (i), (ii) or (iii) of rule 10THB, as the case may be”, shall be substituted;

(b) in column 3, after the words after the words “is determined”, the words “or the methodology for determination of the tariff is approved” shall be inserted.

5.        In the said rules, in rule 10 THD, in sub-rule (1), for the second proviso, the following proviso shall be substituted, namely:-

“Provided further that in respect of eligible specified domestic transactions, other than the transaction referred to in clause (iv) of rule 10 THB, undertaken during the previous year relevant to the assessment year beginning on the 1st day of April, 2013 or beginning on the 1st day of April, 2014 or beginning on the 1st day of April, 2015, Form 3CEFB may be furnished by the assessee on or before the 31st day of March, 2016.”.

6.        In the said rules, in Appendix II, in Form No. 3CEFB, in item 2, in the Table, against the serial number 1, in the second column,-

(a)  for the words, brackets and figures “item (i), (ii) or (iii)”, the words, brackets and figures “clause (i), (ii) or (iii)”, shall be substituted;

(b)  in clause (c), after the word “tariff”, the words “or approving the methodology for determination of  the tariff” shall be inserted.

[F.No. 142/7/2014-TPL]

R. LAKSHMI NARAYANAN,

Under Secy. (Tax Policy and Legislation)

Note: - The principal rules were published in the Gazette of India Extraordinary, Part II, Section 3, Sub-section (i), vide notification number S.O. 969(E), dated the, 26th March, 1962 and last amended vide notification number   S. O. 127(E)  dated the 14.01.2016.

Notification No. : 5/2016 Dated: 17-2-2016


Swachh Bharat Cess – Seeks to amend notification no. 22/2015-ST dated 6.11.2015. – 5/2016 – Dated 17-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF EXCISE AND CUSTOMS

Notification No. 05/2016 – Service Tax

New Delhi, the 17th February, 2016

28 Magha, 1937 Saka

G.S.R.    (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), read with sub-section (5) of section 119 of the Finance Act, 2015 (20 of 2015), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification No. 22/2015-Service Tax dated the 6th November, 2015, published vide G.S.R. 843 (E), dated the 6th November, 2015, namely:-

In the said notification, in the first proviso, for the words, brackets and figure “notification issued under sub-section (1)”, the words, brackets and figures “notification or special order issued under sub-section (1) or as the case may be under sub-section (2)” shall be substituted.

(Himani Bhayana)

Under Secretary to the Government of India

(F. No. 137/79/2015-Service Tax)

Note: The principal notification was published in the Gazette of India Extraordinary, dated the 6th November 2015 vide number G.S R 843 (E) dated the 6th November, 2015 and was last amended by notification No. 23/2015-Service Tax, dated the 12th November, 2015 published vide number G.S.R 853 (E), dated the 12th November 2015.

Budget 2016: Why FM Arun Jaitley should lower TDS rates : 17-02-2016


BENGALURU: Kamla Gupta’s annual tax liability is only Rs 6,000 but her bank deducts about Rs 70,000 as TDS.”The bank deducts 10% on the Rs 7 lakh interest I earn on my bank deposits. It doesn’t take note that my taxable income is reduced to Rs 5.3 lakh after Section 80C and Section 80 deductions,” she says.
As a super senior citizen, 85-yearold Gupta gets a basic exemption of Rs 5 lakh. She is refunded the excess tax deducted six to seven months later when she files her tax returns.”This is a very difficult and inconvenient situation for a person of my age,” she grumbles.

Gupta and other senior citizens are hoping that finance minister Arun Jaitley takes note of the Easwar Committee recommendations and eases the TDS rules in this year’s budget. TDS on interest is 10% of income but the committee wants that to be cut to 5%. In its report released last month, the panel had noted that more than 80% of individual taxpayers and HUFs pay an average tax of less than 5% ..

In its report released last month, the panel had noted that more than 80% of individual taxpayers and HUFs pay an average tax of less than 5% of income.

The proposal makes sense because the tax liability of a person earning Rs 8-10 lakh a year will not be more than Rs 40,000-50,000. Let’s assume somebody who earns Rs 10 lakh a year. After claiming the maximum deduction under Section 80C and Section 80D of the Income-Tax Act, taxable income comes down to Rs 7.75 lakh. If he claims house rent allowance exemption or home loan interest deduction of Rs 2 lakh, it is down to Rs 5.75 lakh. After the basic exemp tion of Rs 2.5 lakh, the tax on the income will be only Rs 41,200, which is 4.1% of income. However, if the person earns more than Rs 10,000 interest from bank deposits during the year, the bank will deduct 10% TDS. And like Gupta, he will have to claim a refund. “This makes the process cumbersome for taxpayers and adds to the workload of the tax department,” says Archit Gupta founder of tax filing portal cleartax.in. Last year’s budget had made things worse by including recurring deposits in the list of investments subject to TDS.

The 10% TDS rule hurts senior citizens most because their income is mostly from interest on deposits. A younger person can rejig his invest ments or submit Form 15G declaration, but for senior citizens, it is not possible to do the running around. “TDS kicks in if interest in come exceeds Rs 10,000 a year. This threshold should be raised to Rs 1-2 lakh for senior citizens while super senior citizens should be exempted from TDS altogether,” says 82-year old Praveen Shroff. The Mumbai based retiree has to file Form 15H every year to escape TDS on the Rs 3.5 lakh he earns on bank deposits.

Though Shroff can file the Form 15H to avoid TDS, Kamla Gupta can’t. Rules say that Form 15H can be filed only if the final tax on the taxpayer’s estimated to tal income is zero.

“Since I have a small tax liability ,I cannot submit Form 15H and pay a 10% TDS,” she says. For taxpayers younger than 60 years, the criteria for submitting Form 15G is even more complicated.

The basic conditions for filing 15G are that the final tax liability should be nil and your total income from in terests (excluding that earned on se curities) during a financial year should not exceed basic exemption slab of Rs 2.5 lakh. So, if your total in come is Rs 4 lakh, of which Rs 3 lakh is earned as bank interest. You might invest Rs 1.5 lakh under Section 80C and be out of the tax net but you are not eligible to submit Form 15G.

The Easwar committee has also recommended easier TDS rules for NRIs. “NRIs are also subjected to a higher TDS rate,” says Sudhir Kaushik, cofounder, TaxSpanner.

com. The TDS rate for NRO deposits is 30.9% against 10.3% for FDs for resident Indians. Moreover, while TDS on deposits of resident Indians kicks in only if the interest exceeds Rs 10,000 in a year, there is no such threshold for NRO deposits.

Source : Business Standard

Notification No. : No.P.6/3/2006-SEZ (vol.111) Dated: 16-2-2016


Guidelines for power Generation, Transmission and Distribution in Special Economic Zones (SEZs) – No.P.6/3/2006-SEZ (vol.111) – Dated 16-2-2016 – Special Economic Zone

No.P.6/3/2006-SEZ (vol.111)

Government of India

Ministry of Commerce & Industry

Department of Commerce

(SEZ Division)

Udyog Bhawan, New Delhi Dated 16th February, 2016

Subject: Guidelines for power Generation, Transmission and Distribution in Special Economic Zones (SEZs) Regarding

Power Guidelines for power Generation, Transmission and Distribution in Special Economic Zones (SEZs) were issued on 27th February, 2009 and subsequently replaced by the guidelines issued on 21st March, 2012.These guidelines were further reviewed and guidelines dated 21st March, 2012 were withdrawn vide letter dated 6th April, 2015. Representations have been received in the Department for restoring the O&M benefits to Developers operating power plants in SEZs. The matter has been examined and in supersession of all previous guidelines issued by this Ministry, the following guidelines are hereby prescribed for generation, transmission and distribution of power in Special Economic Zones:-

(i) A power plant, including non-conventional energy power plant, to be set up by developer/co-developer in an SEZ as part of infrastructure facility will be in the Non-Processing Area of SEZ only, and will be entitled to fiscal benefits only for its initial setting up and no fiscal benefit would be admissible for its operation and maintenance. There will be no obligation to achieve positive Net Foreign Exchange (NFE) for such power plants. Such a power plant can supply power to DTA after meeting the power requirement of the SEZ subject to payment of customs duty as determined by DoR keeping in view the duty foregone on initial setting up of the power plant.

(ii) Henceforth, no single stand-alone power plant will be permitted to be set up in an SEZ in which there would be no other units.

(iii) Henceforth, setting up of captive power plant, including non-conventional energy power plant, can be permitted in Processing Area as a unit, and it will be subject to NFE obligations. Such a power plant will be entitled to all the fiscal benefits covered under section 26 of the SEZ Act including the benefits for initial setting up, maintenance and the duty free import of raw materials and consumables for the generation of the power. They can sell power to DTA on payment of customs duty as determined by DoR keeping in view the duty foregone on installation, as well as O&M, and including service tax exemption.

(iv) With respect to the IT/ITES SEZs, which require continuous quality power, wherever generation of power has been approved by the BoA, as authorized operation, to the Developer/Co-developer within the processing area, and in respect of which there is a statutory requirement on developer/co-developer to supply 24 hours uninterrupted quality power supply at stable frequency in the Zone, in terms of Rule 5A ofSEZ Rules, 2006; in such cases generation of power will be carried out as a unit within the processing area, and such a power plant including non-conventional energy power plant, will be entitled to all the fiscal benefits covered under section 26 of the SEZ Act including the benefits for initial setting up, maintenance and the duty free import of raw materials and consumables for the generation of the power. Such duty free imports of capital goods, raw material and consumables etc. would be counted towards the NFE obligations of the unit.

This facility will also be extended to R&D facilities, Fabless Semi-Conductor Industry, EMS Electronic Manufacturing Services and such other sectors as may be decided by the Central Government, from the date of incorporations of these sectors in Rule 5A of the SEZ Rules, 2006.

They can sell power to DTA on payment of customs duty as determined by DoR keeping in view the duty foregone on installation as well as O&M including service tax exemption.

(v) SEZs which are connected to State/National Grid, will be allowed to create a back-up power facility. Such power back-up facility, if it is in the NPA, only duty benefits on capital expenditure for setting up will be available. If the facility is in processing area, then, duty benefits for setting up as well as O&M will be available, subject to the condition that the facility shall be NFE positive either stand-alone or along with the unit with which it is attached. For DTA sale, customs duty would be charged in both the situations i.e. a power back up utility in NPA or PA at the rate prescribed for each situation/location.

(vi) Those Power Plants in SEZs which were approved prior to 27.02.2009, and subject to issue of Power Guidelines and provisions of SEZ Act & Rules, either as an infrastructure facility by Developer/Co-developer or as a unit in the Processing Area, will be permitted to operate. It is relevant that during period of installation of such plants, duty benefits on capital investment of mega power plants were available under the then prevalent policy guidelines even in the DTA area.

Henceforth, such power plants will be allowed O&M benefits only with regard to the average monthly power supplied to entities within the same SEZ during the preceding year. Henceforth, no O&M benefits including service tax exemption will be allowed for power supplied to DTA/other SEZs/EOUs from such power plants. The surplus power generated in such power plants may be transferred to DTA, without payment of duty, keeping inconsideration of the fact that no duty free benefits on raw materials, consumables, etc. have been availed for generation of such power. However, those power plants not having the capacity of the mega power plant, as given in DoR Notification No. 21/2002-Customs dated 1.03.2002, will be required to pay duty for sale in DTA, on account of duty free import of capital goods, as determined by DoR.

2. These guidelines would be effective with effect from 16th February, 2016.

3. This has the approval of Hon’ble Commerce & Industry Minister.

(T.V. Ravi)

Director (SEZ) 16 Tel: 23063960

Email: talla.ravi@nic.in

No. P.6/3/2006-SEZ (VOL.III) Dated: 16-2-2016


GUIDELINES FOR POWER GENERATION, TRANSMISSION AND DISTRIBUTION IN SPECIAL ECONOMIC ZONES (SEZs) – Dated 16-2-2016 – SEZ

INSTRUCTION NO.P.6/3/2006-SEZ (VOL.III)

DATED 16-2-2016

Power Guidelines for power Generation, Transmission and Distribution in Special Economic Zones (SEZs) were issued on 27th February, 2009 and subsequently replaced by the guidelines issued on 21st March, 2012. These guidelines were further reviewed and guidelines dated 21st March, 2012 were withdrawn vide letter dated 6th April, 2015. Representations have been received in the Department for restoring the O&M benefits to Developers operating power plants in SEZs. The matter has been examined and in supersession of all previous guidelines issued by this Ministry, the following guidelines are hereby prescribed for generation, transmission and distribution of power in Special Economic Zones:-

(i)     A power plant, including non-conventional energy power plant, to be set up by developer/co-developer in an SEZ as part of infrastructure facility will be in the Non-processing Area of SEZ only, and will be entitled to fiscal benefits only for its initial setting up and no fiscal benefit would be admissible for its operation and maintenance. There will be no obligation to achieve positive Net Foreign Exchange (NFE) for such power plants. Such a power plant can supply power to DTA after meeting the power requirement of the SEZ subject to payment of customs duty as determined by DoR keeping in view the duty foregone on initial setting up of the power plant.

(ii)     Henceforth, no single standalone power plant will be permitted to be set up in an SEZ in which there would be no other units.

(iii)     Henceforth, setting up of captive power plant, including non-conventional energy power plant, can be permitted in Processing Area as a unit, and it will be subject to NFE obligations. Such a power plant will be entitled to all the fiscal benefits covered under section 26 of the SEZ Act including the benefits for initial setting up, maintenance and the duty free import of raw materials and consumables for the generation of the power. They can sell power to DTA on payment of customs duty as determined by DoR keeping in view the duty foregone on installation, as well as O&M, and including service tax exemption.

(iv)     With respect to the IT/ITES SEZs, which require continuous quality power, wherever generation of power has been approved by the BoA, as authorized operation, to the Developer/Co-developer within the processing area, and in respect of which there is a statutory requirement on developer/co-developer to supply 24 hours uninterrupted quality power supply at stable frequency in the Zone, in terms of Rule 5A ofSEZ Rules, 2006; in such cases generation of power will be carried out as a unit within the processing area, and such a power plant including non-conventional energy power plant, will be entitled to all the fiscal benefits covered under section 26 of the SEZ Act including the benefits for initial setting up, maintenance and the duty free import of raw materials and consumables for the generation of the power. Such duty free imports of capital goods, raw material and consumables etc. would be counted towards the NFE obligations of the unit.

This facility will also be extended to R&D facilities, Fabless Semi-conductor Industry, EMS Electronic Manufacturing Services and such other sectors as may be decided by the Central Government, from the date of incorporations of these sectors in rule 5A of the SEZ Rules, 2006.

They can sell power to DTA on payment of customs duty as determined by DoR keeping in view the duty foregone on installation as well as O&M including service tax exemption.

(v)     SEZs which are connected to State/National Grid, will be allowed to create a back-up power facility. Such power back-up facility, if it is in the NPA, only duty benefits on capital expenditure for setting up will be available. If the facility is in processing area, then, duty benefits for setting up as well as O&M will be available, subject to the condition that the facility shall be NFE positive – Either standalone or along with the unit with which it is attached. For DTA sale, customs duty would be charged in both the situations i.e. a power back up utility in NPA or PA at the rate prescribed for each situation/location.

(vi)     Those Power Plants in SEZs which were approved prior to 27-2-2009, and subject to issue of Power Guidelines and provisions of SEZ Act & Rules, either as an infrastructure facility by Developer/Co-developer or as a unit in the Processing Area, will be permitted to operate. It is relevant that during period of installation of such plants, duty benefits on capital investment of mega power plants were available under the then prevalent policy guidelines even in the DTA area.

Henceforth, such power plants will be allowed O&M benefits only with regard to the average monthly power supplied to entities within the same SEZ during the preceding year. Henceforth, no O&M benefits including service tax exemption will be allowed for power supplied to DTA/other SEZs/EOUs from such power plants. The surplus power generated in such power plants may be transferred to DTA, without payment of duty, keeping inconsideration of the fact that no duty free benefits on raw materials, consumables, etc. have been availed for generation of such power. However, those power plants not having the capacity of the mega power plant, as given in DoR Notification No. 21/2002-Customs dated 1-3-2002, will be required to pay duty for sale in DTA, on account of duty free import of capital goods, as determined by DoR.

2. These guidelines would be effective with effect from 16th February, 2016.

3. This has the approval of Hon’ble Commerce & Industry Minister.

No. 1/2016 Dated: 15-2-2016


Clarification of the term ‘initial assessment year’ in section 80IA (5) of the Income-tax Act, 1961 – Circular – Dated 15-2-2016 – Income Tax

Circular No. 1 /2016

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

North Block, New Delhi, the 15th February, 2016

Subject: Clarification of the term ‘initial assessment year’ in section 80IA (5) of the Income-tax Act, 1961

Section 80IA of the Income-tax Act, 1961 (‘Act’), as substituted by the Finance Act, 1999 with effect from 01.04.2000, provides for deduction of an amount equal to 100 % of the profits and gains derived by an undertaking or enterprise from an eligible business (as referred to in sub-section (4) of that section) in accordance with the prescribed provisions. Sub-section (2) of section 80IA further provides that the aforesaid deduction can be claimed by the assessee, at his option, for any ten consecutive assessment years out of fifteen years (twenty years in certain cases) beginning from the year in which the undertaking commences operation, begins development or starts providing services etc. as stipulated therein. Sub-section (5) of section 80IA further provides as under

“Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made”.

In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term ‘initial assessment year’. It has been represented that some Assessing Officers are interpreting the term ‘initial assessment year’ as the year in which the eligible business/ manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under sub-section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years.

The matter has been examined by the Board. It is abundantly clear from sub-section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term ‘initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s 80IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity.

The Assessing Officers are, therefore, directed to allow deduction u/s 80IA in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80IA shall also not be pursued to the extent it relates to interpreting ‘initial assessment year’ as mentioned in sub-section (5) of that section for which the Standing Counsels/D.R.s be suitably instructed.

The above be brought to the notice of all Assessing Officers concerned.

(F. No. 200/31/2015-ITA-I)

(Deepshikha Sharma)

Director to the Government of India

No. 02/2016 Dated: 15-2-2016


Passing rectification order under section 154 Income-tax Act, 1961 – Order-Instruction – Dated 15-2-2016 – Income Tax

Instruction No. 02/2016

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

North Block, New Delhi, the 15th of February, 2016

Subject: Passing rectification order under section 154 Income-tax Act, 1961 regd.

Instances have come to the notice of the Board that in some cases rectification order under section 154 of theIncome-tax Act, 1961 (‘Act’) is being passed by the Assessing Officer on AST System without giving copy of the order to the taxpayer concerned. This is causing grievance to the taxpayers as they remain unaware of such orders and consequentially, are unable to pursue the matter further, either in appeal or rectification, if required.

2.   Sub-section (4) of section 154 of the Act mandates that rectification order shall be passed in writing by the Income-tax authorities. Therefore, on consideration of the matter, the Board hereby directs that all rectification applications must be disposed of after passing an order in writing, to be duly served upon the taxpayer concerned and not by merely making necessary rectification on the AST System.

3.  The contents of this Instruction may be brought to the notice of all for necessary compliance.

4.   Hindi version to follow.

(Rohit Garg)

Deputy Secretary to the Government of India

(F. No.225/305/2015-ITA.II)

Notification No. : 362/2016-RB Dated: 15-2-2016


Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016 – 362/2016-RB – Dated 15-2-2016 – Foreign Exchange Management

RESERVE BANK OF INDIA

(Foreign Exchange Department)

(CENTRAL OFFICE)

NOTIFICATION No.FEMA.362/2016-RB

Mumbai, the 15th February , 2016

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016

G.S.R. 166 (E) .-In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA. 20/2000-RB dated 3rd May 2000) namely:-

1. Short Title and Commencement

(i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016.

(ii) They shall come into force from the date of their publication in the Official Gazette.

2. Amendment of the Regulation

In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated 3rd May 2000),

(A)  In Regulation 2, after clause (viiA) and before the existing clause (viia), the following clause shall be inserted, namely:

“(vii AA) “Manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.”

(B)  In Regulation 14,   (a) in sub-regulation 1, the existing clause (i) and clause (ia) shall be amended as under respectively :

“ (i) for the purpose of this regulation, the expression ‘ownership and control’ shall mean and include

(a)  a company shall be considered  as owned by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens. A Limited Liability Partnership will be considered as owned by resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/ or entities which are ultimately ‘owned and controlled by resident Indian citizens’ and  such resident Indian citizens and entities have majority of the profit share;

(b) A company owned by non-residents shall mean an Indian company that is not owned by resident Indian citizens.

(ia) ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.

Explanation: For the purpose of Limited Liability Partnership, ‘control’ shall mean right to appoint majority of the designated partners, where such designated partners, with specific exclusions to others, have control over all the policies of Limited Liability Partnership.”

(b) in sub-regulation 3, in clause (iv), the existing sub-clause (D) shall be amended, namely:

“ D) In the I&B sector where the sectoral cap is up to 49%, the company would need to be ‘owned and controlled’ by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens.

(a)For this purpose, the equity held by the largest Indian shareholder would have to be at least 51 % of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956 or Section 2 (72) of the Companies Act, 2013, as the case may be. The term ‘largest Indian shareholder’, used in this clause, will include any or a combination of the following:

(i) In the case of an individual shareholder,

(aa) The individual shareholder,

(bb) A relative of the shareholder within the meaning of Section 2 (77) of Companies Act, 2013.

(cc) A company/group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest.

(ii) In the case of an Indian company,

(aa) The Indian company

(bb) A group of Indian companies under the same management and ownership control.

(b) For the purpose of this Clause, “Indian company” shall be a company which must have a resident Indian or a relative as defined under Section 2 (77) of Companies Act, 2013/ HUF, either singly or in combination holding at least 51% of the shares.

(c) Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company.”

 (C) The existing sub-regulation 5 shall be amended as under, namely:

“Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens to non-resident entities, in sectors under government approval route 

Foreign investment in sectors/activities under government approval route will be subject to government approval where:

(i) An Indian company is being established with foreign investment and is not owned by a resident entity or

(ii)  An Indian company is being established with foreign investment and is not controlled by a resident entity or

(iii) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by  resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. or

(iv) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger acquisition etc.

(v)  It is clarified that Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIs, FPIs, QFIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/debentures, regardless of whether the said investments have been made under Schedule 1, 2, 2A, 3, 6, 8, 9 and 10 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations.

(vi) Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 will be deemed to be domestic investment at par with the investment made by residents.

(vii) A company, trust and partnership firm incorporated outside India and owned and controlled by nonresident Indians will be eligible for investments under Schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations, 2000 and such investment will also be deemed domestic investment at par with the investment made by residents.”

(d)   in sub-regulation 6, the existing clause (ii) shall be amended, namely:

“ (ii) Downstream investments by Indian companies/LLPs will be subject to the following conditions:

a. Such a company/LLP is to notify SIA, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com within 30 days of such investment, even if capital instruments have not been allotted, along with the modality of investment in new/existing ventures (with/without expansion programme);

b. Downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors as also a shareholders agreement, if any;

c. Issue/transfer/pricing/valuation of shares shall be in accordance with applicable SEBI/RBI guidelines;

d. For the purpose of downstream investment, the Indian companies/LLPs making the downstream investments would have to bring in requisite funds from abroad and not leverage funds from the domestic market. This would, however, not preclude downstream companies/LLPs, with operations, from raising debt in the domestic market. Downstream investments through internal accruals are permissible (For the purposes of FDI, internal accruals will mean as profits transferred to reserve account after payment of taxes), subject to the provision of clause (i) above and also as elaborated below:

A. Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company/ies, will require prior Government/FIPB approval, regardless of the amount or extent of foreign investment. Foreign investment into Non-Banking Finance Companies (NBFCs), carrying on activities approved for FDI, will be subject to the conditions specified in Annex B of Schedule I to these Regulations.

B. Those companies, which are Core Investment Companies (CICs), will have to additional follow RBI’s Regulatory Framework for CICs.

C. For undertaking activities which are under automatic route and without FDI linked performance conditions, Indian company which does not have any operations and also does not have any downstream investments, will be permitted to have infusion of foreign investment under automatic route. However, approval of the Government will be required for such companies for infusion of foreign investment for undertaking activities which are under Government route, regardless of the amount or extent of foreign investment. Further, as and when such a company commences business(s) or makes downstream investment, it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps.

 Note: Foreign investment into other Indian companies would be in accordance/compliance with the relevant sectoral conditions on entry route, conditionalities and caps;

e) The FDI recipient Indian company at the first level which is responsible for ensuring compliance with the FDI conditionalities like no indirect foreign investment in prohibited sector, entry route, sectoral cap / conditionalities, etc. for the downstream investment made by in the subsidiary companies at second level and so on and so forth would obtain a certificate to this effect from its statutory auditor on an annual basis as regards status of compliance with the instructions on downstream investment and compliance with FEMA provisions. The fact that statutory auditor has certified that the company is in compliance with the regulations as regards downstream investment and other FEMA prescriptions will be duly mentioned in the Director’s report in the Annual Report of the Indian company. In case statutory auditor has given a qualified report, the same shall be immediately brought to the notice of the Reserve Bank of India, Foreign Exchange Department (FED), Regional Office (RO) of the Reserve Bank in whose jurisdiction the Registered Office of the company is located and shall also obtain acknowledgement from the RO of having intimated it of the qualified auditor report. RO shall file the action taken report to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central Office, Central Office Building, Shahid Bhagat Singh Road, Mumbai 400001.”

C In Schedule 1, 

(i) In paragraph 2, paragraph beginning with “Provided further that the shares or convertible debentures…..” and ending with “…………permitted to the extent specified in Regulation 14.” shall be deleted.

(ii) in paragraph 2, in sub-paragraph 4, after clause (iv), the following shall be added, namely:

“(v) by way of swap of shares, provided the company in which the investment is made is engaged in an automatic route sector, subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.

Note: A company engaged in a sector where foreign investment requires Government approval may issue shares to a non-resident through swap of shares only with approval of the Government”

(iii) in paragraph 3, the existing sub-paragraph (c) shall stands deleted.

(iv) in  ‘Annex B’, the existing table shall be substituted with the following, namely:

Foreign Investments caps and entry route in various sectors

SL. No

Sector/Activity

Foreign Investment Cap (%)

Entry Route

Agriculture
1. Agriculture & Animal Husbandry    
  a) Floriculture, horticulture, Apiculture and Cultivation Of vegetables & mushrooms under controlled conditions;

b) Development and production of seeds and planting ma­terial;

c) Animal Husbandry (including breeding of dogs), Pisiculture, Aquaculture, under controlled conditions; and

d) Services related to agro and allied sectors.

Note :Besides the above, FDI is not allowed in any other agricultural sector/activity

100% Automatic
1.1 Other Conditions    
  The term ‘under controlled conditions’ covers the following:

(i) ‘Cultivation under controlled conditions’ for the categories of floriculture, horticulture, cultivation of vegetables and mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically

(ii) In case of Animal Husbandry, scope of the term ‘under controlled conditions’ covers–

(a) Rearing of animals under intensive farming systems with stall- feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems as prescribed by the National Livestock Policy 2013 and in conformity with the existing ‘Standard Operating Practices and Minimum Standard Protocol.’

(b) Poultry breeding farms and hatcheries where micro-climate is controlled through advanced technologies like incubators, ventilation systems etc.

(iii) In the case of pisciculture and aquaculture, scope of the term ‘under controlled conditions’ covers–

(a) Aquariums

(b) Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control.

(iv) In the case of apiculture, scope of the term ‘‘under controlled conditions’ covers–

a) Production of honey by bee-keeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons.

2. Plantation
2.1 i. Tea sector including tea plantations

ii. Coffee plantations

iii. Rubber Plantations

iv. Cardamom plantations

v. Palm oil tree plantations

vi. Olive oil tree plantations

Note: FDI is not allowed in any plantation sector/activity except those mentioned above.

100% Automatic route
2.2 Other Condition    
  Prior approval of the State Government concerned is required in case of any future land use change.
3. MINING    
3.1 Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957. 100% Automatic
3.2 Coal and Lignite    
  (1) Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973. 100% Automatic
  (2) Setting up coal processing plants like washeries, subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 100% Automatic
3.3 Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
3.3.1 Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation) Act, 1957. 100% Government
3.3.2 Other Conditions    
  (i) FDI for separation of titanium bearing minerals & ores will be subject to the following conditions viz:

A. Value addition facilities are set up within India along with transfer of technology;

B. Disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.

(ii)FDI will not be allowed in mining of “prescribed substances” listed in the Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of Atomic Energy.

  Clarification:

i. For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition, Ilmenite can be processed to produce Synthetic Rutile or Titanium Slag as an intermediate value added product.

ii. The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled.

4. Petroleum & Natural Gas
4.1 Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. 100% Automatic
4.2 Petroleum refining by the Public Sector Undertakings (PSUs), without any disinvestment or dilution of domestic equity in the existing PSUs. 49% Automatic
5 Manufacturing 100% Automatic
  Subject to the provisions of the FDI policy, foreign investment in ‘manufacturing’ sector is under automatic route. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without Government approval.
6. Defence
6.1 Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951 49% Government route up to 49%

Above 49% under Government route on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country.

6.2 Other Conditions
  i. Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.

ii. Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.

iii. Foreign investment in the sector is subject to security clearance and guidelines of the M/o Defence.

iv. Investee company should be structured to be self-sufficient in areas of product design and development. The investee/joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.

Services Sector
Information Services
7. Broadcasting
7.1 Broadcasting Carriage Services
7.1.1 (1) Teleports (setting up of up-linking HUBs/Teleports);

(2) Direct to Home (DTH);

(3) Cable Networks [Multi System Operators (MSOs)operating at National or State or District level and undertaking up gradation of networks towards digitalization and addressability]:

(4) Mobile TV;

(5) Headend-in-the Sky Broadcasting Service (HITS)

100% Automatic up to 49%

Government route beyond 49%

7.1.2 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)). 100% Automatic up to 49%

Government route beyond 49%

7.2 Broadcasting Content Services    
7.2.1 Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from time to time, by Ministry of Information & Broadcasting, for grant of permission for setting up of FM Radio stations. 49% Government
7.2.2 Up-Linking of ‘News & Current Affairs’ TV Channels 49% Government
7.2.3 Up-linking a Non-’News & Current Affairs’ TV Channels/Down-linking of TV Channels 100% Automatic
7.3 FDI for Up-linking/Down-linking TV Channels will be subject to compliance with the relevant Up-linking/Down-linking Policy notified by the Ministry of Information & Broadcasting from time to time.
7.4 Foreign Investment (FI) in companies engaged in all the aforestated services will be subject to relevant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting.
7.5 The foreign investment (FI) limit in companies engaged in the afore stated activities shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Foreign Portfolio Investors(FPIs), Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), [ Depository Receipts issued under Schedule 10 of these Regulations with equity shares or compulsorily and mandatorily convertible preference shares or compulsory and mandatorily convertible debentures or warrant or any other security in which foreign direct investment can be made in terms of Schedule1 of the principal Regulations, as underlying] (GDRs) and convertible preference shares held by foreign entities.]
7.6 Foreign investment in the aforestated broadcasting carriage services will be subject to the following security conditions/ terms:

Mandatory Requirement for Key Executives of the Company

(i) The majority of Directors on the Board of the Company shall be Indian Citizens.

(ii) The Chief Executive Officer (CEO), Chief Officer In-charge of technical network operations and Chief Security Officer should be resident Indian citizens

Security Clearance of Personnel

(iii) The Company, all Directors on the Board of Directors and such key executives like Managing Director/ Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), shareholders who individually hold 10% or more paid-up capital in the company and any other category, as may be specified by the Ministry of Information and Broadcasting from time to time, shall require to be security cleared.

In case of the appointment of Directors on the Board of the Company and such key executives like Managing Director/Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by the Ministry of Information and Broadcasting from time to time, prior permission of the Ministry of Information and Broadcasting shall have to be obtained.

It shall be obligatory on the part of the company to also take prior permission from the Ministry of Information and Broadcasting before effecting any change in the Board of Directors.

(iv) The Company shall be required to obtain security clearance of all foreign personnel likely to be deployed for more than 60 days in a year by way of appointment, contract, and consultancy or in any other capacity for installation, maintenance, operation or any other services prior to their deployment. The security clearance shall be required to be obtained every two years.

Permission vis-a-vis Security Clearance

(v) The permission shall be subject to permission holder/licensee remaining security cleared throughout the currency of permission. In case the security clearance is withdrawn the permission granted is liable to be terminated forthwith.

(vi) In the event of security clearance of any of the persons associated with the permission holder/licensee or foreign personnel being denied or withdrawn for any reasons whatsoever, the permission holder/licensee will ensure that the concerned person resigns or his services terminated forthwith after receiving such directives from the Government, failing which the permission/license granted shall be revoked and the company shall be disqualified to hold any such Permission/license in future for a period of five years.

Infrastructure/Network/Software related requirement

(vii) The officers/officials of the licensee companies dealing with the lawful interception of Services will be resident Indian citizens.

(viii) Details of infrastructure/ network diagram (technical details of the network) could be provided on a need basis only, to equipment suppliers/manufactures and the affiliate of the licensee company. Clearance from the licensor would be required if such information is to be provided to anybody else.

(ix) The Company shall not transfer the subscribers’ databases to any person/place outside India unless permitted by relevant Law.

(x) The Company must provide traceable identity of their subscribers.

Monitoring, Inspection and Submission of Information

(xi) The Company should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location as and when required by Government.

(xii) The company, at its own costs, shall, on demand by the Government or its authorized representative, provide the necessary equipment, services and facilities at designated place(s) for continuous monitoring or the broadcasting service by or under supervision of the Government or its authorized representative.

(xiii) The Government of India, Ministry of Information & Broadcasting or its authorized representative shall have the right to inspect the broadcasting facilities. No prior permission/intimation shall be required to exercise the right of Government or its authorized representative to carry out the inspection. The company will, if required by the Government or its authorized representative, provide necessary facilities for continuous monitoring for any particular aspect of the company’s activities and operations. Continuous monitoring, however, will be confined only to security related aspects, including screening of objectionable content.

(xiv) The inspection will ordinarily be carried out by the Government of India, Ministry of Information & Broadcasting or its authorized representative after reasonable notice, except in circumstances where giving such a notice will defeat the very purpose of the inspection.

(xv) The company shall submit such information with respect to its services as may be required by the Government or its authorized representative, in the format as may be required, from time to time.

(xvi) The permission holder/licensee shall be liable to furnish the Government of India or its authorized representative or TRAI or its authorized representative, such reports, accounts, estimates, returns or such other relevant information and at such periodic intervals or such times as may be required.

The service providers should familiarize/train designated officials of the Government or officials of TRAI or its authorized representative(s) in respect of relevant operations/features of their systems.

National Security Conditions

(xvii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. The Government of India, Ministry of Information and Broadcasting shall have the right to temporarily suspend the permission of the permission holder/Licensee in public interest or for national security for such period or periods as it may direct. The company shall immediately comply with any directives issued in this regard failing which the permission issued shall be revoked and the company disqualified to hold any such permission, in future, for a period of five years.

(xviii) The company shall not import or utilize any equipment, which are identified as unlawful and/or render network security vulnerable.

Other conditions

(xix) Licensor reserves the right to modify these conditions or incorporate new conditions considered necessary in the interest of national security and public interest or for proper provision of broadcasting services.

(xx) Licensee will ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulation and public policy.

8. Print Media
8.1 Publishing of newspaper and periodicals dealing with news and current affairs 26% Government
8.2 Publication of Indian editions of foreign magazines dealing with news and current affairs 26% Government
8.2.1 Other conditions    
  (i) ‘Magazine’, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news.

(ii) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4-12-2008.

8.3 Publishing/printing of Scientific and Technical Magazines/ specialty journals/periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 100% Government
8.4 Publication of facsimile edition of foreign newspapers 100% Government
8.4.1 Other conditions:    
  (i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India.

(ii) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, as applicable.

(iii) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31-3-2006, as amended from time to time.

9. Civil Aviation
9.1 The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services/Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions.

For the purposes of the Civil Aviation sector:

(i) “Airport” means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934;

(ii) “Aerodrome” means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto;

(iii) “Air transport service” means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights;

(iv) “Air Transport Undertaking” means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward;

(v) “Aircraft component” means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment;

(vi) “Helicopter” means a heavier than air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis;

(vii) “Scheduled air transport service” means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public;

(viii) “Non-Scheduled air Transport service” means any service which is not a scheduled air transport service and will include Cargo airlines;

(ix) “Cargo airlines” would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation;

(x) “Seaplane” means an aeroplane capable normally of taking off from and alighting solely on water;

(xi) “Ground Handling” means (i) ramp handling, (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling.

9.2 Airports    
  (a) Greenfield projects

(b) Existing projects

100%

100%

Automatic

Automatic upto 74% ; Government

Route beyond 74%

9.3 Air Transport Services    
  (a) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline

(b) Regional Air Transport Service

49%

(100% for NRIs)

Automatic
  (2) Non-Scheduled Air Transport Service 100% Automatic
  (3) Helicopter services/ seaplane services requiring DGCA approval 100% Automatic
9.3.1 Other Conditions    
  (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services.

(b) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services, as per the limits and entry routes mentioned above.

(c) Foreign airlines are also allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. Such investment would be subject to the following conditions:

(i) It would be made under the Government approval route.
(ii) The 49% limit will subsume FDI and FII/FPI investment.
(iii) The investments so made would need to comply with the relevant regulations of SEBI, such as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/ Substantial Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules and regulations.
(iv) A Scheduled Operator’s Permit can be granted only to a company:

a) that is registered and has its principal place of business within India;
b) the Chairman and at least two-thirds of the Directors of which are citizens of India; and
c) the substantial ownership and effective control of which is vested in Indian nationals.

(v) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security view point before deployment; and
(vi) All technical equipment that might be imported into India as a result of such investment shall require clearance from the relevant authority in the Ministry of Civil Aviation.

Note: (i) The FDI limits/entry routes, mentioned at paragraph 9.3.1 and 9.3.2 above, are applicable in the situation where there is no investment by foreign airlines.
(ii) The dispensation for NRIs regarding FDI up to 100% will also continue in respect of the investment regime specified at paragraph 9.3.1(c) (ii) above.
(iii) The policy mentioned at 9.3.1(c) above is not applicable to M/s Air India Limited

9.3.2 Foreign Airlines in the capital of the Indian companies, operating schedule and non-scheduled air transport services 49% (100% for NRIs) Government
9.4 Other Services under Civil Aviation sector    
  (1) Ground Handling Services subject to sectoral regulations and security clearance 100% Automatic
  (2) Maintenance and Repair organizations; flying training institutes and technical training institutions 100% Automatic
10. Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898 and excluding the activity relating to the distribution of letters 100% Automatic
11. Construction Development: Townships, Housing, Built-up infrastructure
11.1 Construction-development projects (which would include development of townships, construction of residential/commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships) 100% Automatic
11.2 Each phase of the construction development project would be considered as a separate project for the purposes of FDI policy. Investment will be subject to the following conditions:

(A) (i) The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage.

(ii) Notwithstanding anything contained at (A) (i) above, a foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche’ of foreign investment has been completed. Further, transfer of stake from one non-resident to another non- resident, without repatriation of investment will neither be subject to any lock-in period nor to any government approval.

(B) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned.

(C) The Indian investee company will be permitted to sell only developed plots. For the purposes of this policy “developed plots” will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available.

(D) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-Laws/regulations of the State Government/Municipal/Local Body concerned.

(E) The State Government/Municipal/Local Body concerned, which approves the building/development plans, will monitor compliance of the above conditions by the developer.

Note:

i. It is clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs).

“Real estate business” means dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent income on lease of the property, not amounting to transfer, will not amount to real estate business.

ii. Condition of lock-in period at (A) above will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs.

iii. Completion of the project will be determined as per the local bye-laws/rules and other regulations of State Governments.

iv. It is clarified that 100 % FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period.

v. “Transfer”, in relation to FDI policy on the sector, includes,-

a. the sale, exchange or relinquishment of the asset; or

b. the extinguishment of any rights therein; or

c. the compulsory acquisition thereof under any law; or

d. any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or

e. any transaction, by acquiring shares in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

12. Industrial Parks -New and existing 100% Automatic
12.1 (i) “Industrial Park” is a project in which quality infrastructure in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity.

(ii) “Infrastructure” refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), railway line/sidings including electrified railway lines and connectivities to the main railway line, water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning.

(iii) “Common Facilities” refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), railway line/sidings including electrified railway lines and connectivities to the main railway line, water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park.

(iv) “Allocable area” in the Industrial Park means-

(a) in the case of plots of developed land – the net site area available for allocation to the units, excluding the area for common facilities.

(b) in the case of built up space – the floor area and built-up space utilized for providing common facilities.

(c) in the case of a combination of developed land and built-up space – the net site and floor area available for allocation to the units excluding the site area and built-up space utilized for providing common facilities.

(v) “Industrial Activity” means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied R&D on bio-technology, pharmaceutical sciences/life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities.

12.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 11 above, provided the Industrial Parks meet with the under-mentioned conditions:

(i) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area;

(ii) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area.

13. Satellites – Establishment and operation    
13.1 Satellites Establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO 100% Government
14. Private Security Agencies 49% Government
15. Telecom services
(including Telecom Infrastructure Providers Category-l)

All telecom services including Telecom Infrastructure Providers Category-I, viz. Basic, Cellular, United Access Services, Unified license (Access services), Unified License, National/ International Long Distance, Commercial V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS), All types of ISP licenses, Voice Mail/Audiotex / UMS, Resale of IPLC, Mobile Number Portability services, Infrastructure Provider Category-I (providing dark fibre, right of way, duct space, tower) except Other Service Providers.
100% Automatic upto 49%

Government route beyond 49%

15.1.1 Other Condition    
  FDI up to 100% with 49% on the automatic route and beyond 49% on the government route subject to observance of licensing and security conditions by licensee as well as investors as notified by the Department of Telecommunications (DoT) from time to time, except “Other Service Providers”, which are allowed 100% FDI on the automatic route.
16. Trading    
16.1 (i) Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) 100% Automatic
16.1.1 Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, imply sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ ex-bonded warehouse business sales and B2B e-Commerce.
16.1.2 Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT):

(a) For undertaking ‘WT’, requisite licenses/registration/permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority /Local Self-Government Body under that State Government should be obtained.

(b) Except in case of sales to Government, sales made by the wholesaler would be considered as ‘cash & carry wholesale trading/wholesale trading’ with valid business customers, only when WT are made to the following entities:

(i) Entities holding sales tax/VAT registration/service tax/excise duty registration; or

(ii) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/registration certificate/membership certificate, as the case may be, is itself/himself/herself engaged in a business involving commercial activity; or

(iii) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or

(iv) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption.

Note: An Entity, to whom WT is made, may fulfil anyone of the 4 conditions.

(c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/ license/permit etc. number, amount of sale etc. should be maintained on a day to day basis.

(d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture.

(e) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations.

(f) A wholesale/cash & carry trader can undertake single brand retail trading, subject to the conditions mentioned in para 16.3. An entity undertaking wholesale/cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions of the FDI policy for wholesale/cash and carry business and for retail business have to be separately complied with by the respective business arms.

16.2 B2B E-commerce activities 100% Automatic
  E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter alia implying that existing restrictions on FDI in domestic trading would be applicable to e­commerce as well.
16.3 Single Brand product retail trading 100% Automatic up to 49%. Government route beyond 49%
  1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

2) FDI in Single Brand product retail trading would be subject to the following conditions:

a) Products to be sold should be of a ‘Single Brand’ only.

b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

c) Single Brand’ product-retail trading would cover only products which are branded during manufacturing. A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, directly or through a legally tenable agreement with the· brand owner for undertaking single brand product retail trading. The onus for ensuring compliance with this condition will rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/franchise/sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and SIA/FIPB for cases involving approval.

d) In respect of proposals involving FDI beyond 51%, sourcing of 30 of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met annually from the commencement of the business i.e. opening of the first store. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of Foreign Investment for the purpose of carrying out single-brand product retail trading.

e) Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

3) Application seeking permission of the Government for FDI exceeding 49 in a company which proposes to undertake single brand retail trading in India would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The applications would specifically indicate the product/product categories which are proposed to be sold under a ‘Single Brand’. Any addition to the product/product categories to be sold under ‘Single Brand’ would require a fresh approval of the Government. In case of FDI up to 49 %, the list of products/product categories proposed to be sold except food products would be provided to the RBI.

4) Applications would be’ processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval.

Note:

i. Conditions mentioned at Para (2) (b) & (2) (d) will not be applicable for undertaking SBRT of Indian brands.

ii. An Indian manufacturer is permitted to sell its own branded products in any manner i.e. wholesale, retail, including through e-commerce platforms.

iii. Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70% of its products in house, and sources, at most 30% from Indian manufacturers.

iv. Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.

v. Government may relax sourcing norms for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology and where local sourcing is not possible.

16.4 Multi Brand Retail Trading 51% Government
  (1) FDI in multi brand retail trading, in all products, will be permitted, subject to the following conditions:

(i) Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

(ii) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.

(iii) At least 50% of total FDI brought in the first tranche of US $ 100 million, shall be invested in ‘back-end infrastructure’ within three years, where ‘back-end infrastructure’ will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back-end infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements.

(iv) At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant & machinery not exceeding US $ 2.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. The ‘small industry’ status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a ‘small industry’ for this purpose, even if it outgrows the said investment of US $ 2.00 million during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years total value of the manufactured/processed products purchased, beginning lst April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.

(v) Self-certification by the company, to ensure compliance of the conditions at serial Nos. (i), (ii) and (iv) above, which could be cross-checked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors.

(vi) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms. Around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

(vii) Government will have the first right to procurement of agricultural products.

(viii) The above policy is an enabling policy only and the State Governments/Union Territories would be free to take their own decisions in regard to implementation of the policy. Therefore, retail sales outlets may be set up in those States/Union Territories which have agreed, or agree in future, to allow FDI in MBRT under this policy. The list of States/Union Territories which have conveyed their agreement is at (2) below. Such agreement, in future, to permit establishment of retail outlets under this policy, would be conveyed to the Government of India through the Department of Industrial Policy & Promotion and additions would be made to the list at (2) below accordingly. The establishment of the retail sales outlets will be in compliance of applicable State/Union Territory laws/ regulations, such as the Shops and Establishments Act etc.

(ix) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading.

(x) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval.

(2) List of States/Union Territories as mentioned in Paragraph 16.4.(1) (viii)

1. Andhra Pradesh
2. Assam
3. Delhi
4. Haryana
5. Himachal Pradesh
6. Jammu & Kashmir
7. Karnataka
8. Maharashtra
9. Manipur
10. Rajasthan
11. Uttarakhand
12. Daman & Diu and Dadra and Nagar Haveli (Union Territories)

16.5 Duty Free Shops 100% Automatic
  (i) Duty Free Shops would mean shops set up in custom bonded area at International Airports/ International Seaports and Land Custom Stations where there is transit of international passengers.

(ii) Foreign investment in Duty Free Shops is subject to compliance of conditions stipulated under the Customs Act, 1962 and other laws, rules and regulations.

(iii) Duty Free Shop entity shall not engage into any retail trading activity in the Domestic Tariff Area of the country.

  FINANCIAL SERVICES

Foreign investment in other financial services, other than those indicated below, would require prior approval of the Government:

F.1 Asset Reconstruction Companies    
F.1.1 ‘Asset Reconstruction Company’ (ARC) means a company registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). 100% Automatic up to 49%
Government route beyond 49%
F.1.1.2 Other Conditions

(i) Persons resident outside India can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank, up to 49% on the automatic route, and beyond 49% on the Government route.

(ii) No sponsor may hold more than 50% of the shareholding in an ARC either by way of FDI or by routing it through an FII/FPI controlled by the single sponsor.

(iii) The total shareholding of an individual FII/FPI shall be below 10% of the total paid-up capital.

(iv) FIIs/FPIs can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs/FPIs can invest up to 74 per cent of each tranche of scheme of SRs. Such investment should be within the FII/FPI limit on corporate bonds prescribed from time to time, and sectoral caps under extant FDI Regulations should also be complied with.

(v) All investments would be subject to provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

F.2 Banking – Private sector    
F.2.1 Banking – Private sector 74% Automatic upto 49%
Government route beyond 49% and upto 74%
F.2.2 Other conditions:    
  1) This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FIIs/FPIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs, and shall continue to include investment made by non-residents under IPOs, Private placements, DRs and through acquisition of shares from existing shareholders

2) The aggregate foreign investment in a private bank from all sources will be allowed – up to a maximum of 74 per cent of the paid-up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank.

3) The stipulations as above will be applicable to all investments in existing private sector banks also.

4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs/FPIs and NRIs will be as follows:

(i) In the case of FIIs/FPIs, as hitherto, individual FII/FPI holding is restricted to below 10 per cent of the total paid-up capital, aggregate limit for all FIIs/FPIs/QFIs cannot exceed 24 per cent of the total paid-up capital, which can be raised up to sectoral limit of 74 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body.

a. In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non-repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non- repatriation basis provided the banking company passes a special resolution to that effect in the General Body.

b. Applications for foreign direct investment in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) in order to ensure that the 49 per cent limit of foreign shareholding applicable for the insurance sector is not being breached.

c. Transfer of shares under FDI from residents to non-residents will continue to require approval of RBI and Government as per Regulation 14 (5) as applicable.

d. The policies and procedures prescribed from time to time by RBI and other institutions such as SEBI, Ministry of Corporate Affairs and IRDAI on these matters will continue to apply.

e. RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid up capital of the private bank will apply to non- resident investors as well.

(ii) Setting up of a subsidiary by foreign banks

(a) Foreign banks will be permitted to either have branches or subsidiaries but not both.

(b) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank’s licensing criteria will be allowed to hold 100 per cent paid-up capital to enable them to set up a wholly-owned subsidiary in India.

(c) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 per cent in a private bank.

(d) A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or through a fresh banking license. A foreign bank will be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 per cent of the paid-up capital of the private sector bank is held by residents at all times consistent with para (i) (b) above.

(e) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks.

(f) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI.

(g) All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI.

(iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals.

F.3 Banking – Public Sector    
F.3.1 Banking – Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts, 1970/80.

This ceiling (20%) is also applicable to the State Bank of India and its associate banks.

20% Government
F.4 Commodity Exchanges    
F.4.1 1. Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges.

2. For the purposes of this Chapter,

(i) “Commodity Exchange” is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities.

(ii) “Recognized association” means an association to which recognition for the time being has been granted by the Central Government under section 6 of the Forward Contracts (Regulation) Act, 1952.

(iii) “Association” means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative.

(iv) “Forward contract” means a contract for the delivery of goods and which is not a ready delivery contract.

(v) “Commodity derivative” means-

• a contract for delivery of goods, which is not a ready delivery contract; or

• a contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the SEBI by the Central Government, but does not include securities.

F.4.2 Commodity Exchange 49% Automatic
F.4.3 Other conditions:

(i) FII/FPI purchases shall be restricted to secondary market only.

(ii) No non-resident investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies.

(iii) Foreign investment in commodity exchanges will be subject to the guidelines of the Central Government / SEBI from time to time.

F.5 Credit Information Companies (CIC)    
F.5.1 Credit Information Companies 100% Automatic
F.5.2 Other Conditions:

(1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005.

(2) Foreign investment is permitted subject to regulatory clearance from RBI.

(3) Such FII/FPI investment would be permitted subject to the conditions that:

(a) A single entity should directly or indirectly hold below 10% equity;

(b) Any acquisition in excess of 1 % will have to be reported to RBI as a mandatory requirement; and

(c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

F.6 Infrastructure Company in the Securities Market    
F.6.1 Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% Automatic
F.6.2 Other Conditions:    
F.6.2.1 FII/FPI can invest only through purchases in the secondary market    
F.7. Insurance    
F.7.1 Insurance

(i) Insurance Company
(ii) Insurance Brokers
(iii) Third Party Administrators
(iv) Surveyors and Loss Assessors
(v) Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999)

49% Automatic upto 26%,; Government route beyond 26% and upto 49%
F.7.2 Other Conditions:

(a) No Indian insurance company shall allow the aggregate holdings by way of total foreign investment in its equity shares by foreign investors, including portfolio investors, to exceed forty-nine percent of the paid up equity capital of such Indian insurance company.

(b) Foreign direct investment proposals which take the total foreign investment in the Indian insurance company above 26 percent and up to the cap of 49 percent shall be under Government route.

(c) Foreign investment in the sector is subject to compliance of the provisions of the Insurance Act, 1938 and the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority of India for undertaking insurance activities.

(d) An Indian insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian entities as determined/notified by Department of Fianncial Services.

(e) Foreign portfolio investment in an Indian insurance company shall be governed by the provisions contained in sub-regulations (2), (2A), (3) and (8) of regulation 5 of FEMA Regulations, 2000 and provisions of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations.

(f) Any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by Reserve Bank of India under the FEMA.

(g) The foreign equity investment cap of 49 percent shall apply on the same terms as above to Insurance Brokers, Third Party Administrators, Surveyors and Loss Assessors and Other Insurance Intermediaries appointed under the provisions of the Insurance Regulatory and Development Authority Act,1999 (41 of 1999).

(h) Provided that where an entity like a bank, whose primary business is outside the insurance area, is allowed by the Insurance Regulatory and Development Authority of India to function as an insurance intermediary, the foreign equity investment caps applicable in that sector shall continue to apply, subject to the condition that the revenues of such entities from their primary (i.e. non-insurance related) business must remain above 50 percent of their total revenues in any financial year.

(i) The provisions of paragraphs F.2.2 (3) (i) (c) & (e), relating to ‘Banking-Private Sector’, shall be applicable in respect of bank promoted insurance companies.

(j) Terms ‘Control’, ‘Equity Share Capital’, ‘Foreign Direct Investment’ (FDI), ‘Foreign Investors’, ‘Foreign Portfolio Investment’, ‘Indian Insurance Company’, ‘Indian Company’, ‘Indian Control of an Indian Insurance Company’, ‘Indian Ownership’, ‘Non-resident Entity’, ‘Public Financial Institution’, ‘Resident Indian Citizen’, ‘Total Foreign Investment’ will have the same meaning as provided in Notification No. G.S.R 115 (E), dated 19th February, 2015.

F.8. Non-Banking Finance Companies (NBFCs)    
F.8.1 Foreign investment in NBFC is allowed under the automatic route in only the following activities:

(i) Merchant Banking
(ii) Underwriting
(iii) Portfolio Management Services
(iv) Investment Advisory Services
(v) Financial Consultancy
(vi) Stock Broking
(vii) Asset Management
(viii) Venture Capital
(ix) Custodian Services
(x) Factoring
(xi) Credit Rating Agencies
(xii) Leasing & Finance
(xiii) Housing Finance
(xiv) Forex Broking
(xv) Credit Card Business
(xvi) Money Changing Business
(xvii) Micro Credit
(xviii) Rural Credit

100% Automatic
F.8.2 Other Conditions    
  (1) Investment would be subject to the following minimum capitalisation norms:

(i) US $0.5 million for foreign capital up to 51 % to be brought upfront.

(ii) US $ 5 million for foreign capital more than 51 % and up to 75% to be brought upfront.

(iii) US $ 50 million for foreign capital more than 75% out of which US $ 7.5 million to be brought upfront and the balance in 24 months.

(iv) NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1 of DIPP Circular 1 on Consolidated FDI Policy, therefore, shall not apply to downstream subsidiaries.

(v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below.

(vi) Non-Fund based activities: US$ 0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition:

It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company.

Note: The following activities would be classified as Non-Fund Based activities:

(a) Investment Advisory Services

(b) Financial Consultancy

(c) Forex Broking

(d) Money Changing Business

(e) Credit Rating Agencies

(vii) This will be subject to compliance with the guidelines of RBI.

Note: (i) Credit Card business includes issuance, sales, marketing & design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc.

(ii) Leasing & Finance covers only financial leases and not operating leases.

FDI in operating leases is permitted up to 100 % on the automatic route.

(2) The NBFC will have to comply with the guidelines of the relevant regulator/s, as applicable.

F.8.3 White Label ATM Operations 100% Automatic
  Other Conditions:

i. Any non-bank entity intending to set up a WLAs should have a minimum net worth of ₹ 100 crore as per the latest financial year’s audited balance sheet, which is to be maintained at all times.

ii. In case the entity is also engaged in any other 18 NBFC activities, then the foreign investment in the company setting up WLA, shall have to comply with the minimum capitalisation norms for foreign investment in NBFC activities, as provided in para F.8.2.

iii. FDI in the WLAO will be subject to the specific criteria and guidelines issued by RBI vide Circular No. DPSS,CO.PD.No.2298/02.10.002/2011-12, as amended from time to time.

F.9 Power Exchanges    
F.9.1 Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 49% Automatic
F.9.2 Other conditions    
  (i) FII purchases shall be restricted to secondary market only;

(ii) No non-resident investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies; and

(iii) The foreign investment would be in compliance with SEBI Regulations; other applicable laws/regulations; security and other conditionalities.

   
F.10 Pension Sector 49% Automatic up to 26%; Government route beyond 26% and up to 49 %
17. Pharmaceuticals    
17.1 Greenfield 100% Automatic
17.2 Brown Field 100% Government
17.3 Other Conditions
  (i) ‘Non-compete’ clause would not be allowed except in special circumstances with the approval of the Foreign Investment Promotion Board.

(ii) The prospective investor and the prospective investee are required to provide a certificate along with the FIPB application.

(iii) Government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting approval.

Note :

i. FDI upto 100% under the automatic route is permitted for manufacturing of medical devices. The abovementioned conditions will, therefore, not be applicable to greenfield as well as brownfield projects of this industry.

ii. Medical device means :-

a) Any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of :-

(aa) Diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;
(ab) diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or handicap;
(ac) investigation, replacement or modification or support of the anatomy or of a physiological process;
(ad) supporting or sustaining life;
(ae) disinfection of medical devices;
(af) control of conception;

and which does not achieve its primary intended action in or on the human body or animals by any pharmacological or immunological or metabolic means, but which may be assisted in its intended function by such means;

b) an accessory to such an instrument, apparatus, appliance, material or other article;

c) a device which is reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of in vitro examination of specimens derived from the human body or animals.

iii. The definition of medical device at Note (ii) above would be subject to the amendment in Drugs and Cosmetics Act.

18 Railway Infrastructure    
  Construction, operation and maintenance of the following:

(i) Suburban corridor projects through PPP, (ii) speed train projects, (iii) Dedicated freight lines, (iv) Rolling stock including train sets, and locomotives/coaches manufacturing and maintenance facilities, (v) Railway Electrification, (vi) Signaling systems, (vii) Freight terminals, (viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines and connectivities to main railway line and (x) Mass Rapid Transport Systems.

100% Automatic
  Note:-

(i) Foreign Direct Investment in the abovementioned activities open to private participation including FDI is subject to sectoral guidelines of Ministry of Railways.

(ii) Proposals involving FDI beyond 49% in sensitive areas from security point of view, will be brought by the Ministry of Railways before the Cabinet Committee on Security (CCS) for consideration on a case to case basis.

D. In Schedule 9,

(i) the existing paragraph 4 shall be amended as under, namely:  

“ 4. Entry Route

FDI in LLPs is permitted, subject to the following conditions:

i. FDI is permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI linked performance conditions.

ii. An Indian company or an LLP, having foreign investment, will be permitted to make downstream investment in another company or LLP engaged in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions. Onus shall be on the Indian company/ LLP accepting downstream investment to ensure compliance with the above conditions.

iii. FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008.”

(ii) the existing paragraph 8 shall stands deleted.  

  E.       The existing Schedule 11 shall be substituted by the following, namely: 

“Schedule 11

[See Regulation 5(10)]

Investment by a person resident outside India in an Investment Vehicle

1. A person resident outside India including an RFPI and an NRI may invest in units of Investment Vehicles subject to the conditions laid down in this Schedule.

2. The payment for the units of an Investment Vehicle acquired by a person resident or registered / incorporated outside India shall be made by an inward remittance through the normal banking channel including by debit to an NRE or an FCNR account.

3. A person resident outside India who has acquired or purchased units in accordance with this Schedule may sell or transfer in any manner or redeem the units as per regulations framed by SEBI or directions issued by RBI.

4. Downstream investment by an Investment Vehicle shall be regarded as foreign investment if either the Sponsor or the Manager or the Investment Manager is not Indian ‘owned and controlled’ as defined in Regulation 14 of the principal Regulations.

Provided that for sponsors or managers or investment managers organized in a form other than companies or LLPs, SEBI shall determine whether the sponsor or manager or investment manager is foreign owned and controlled.

Explanation 1: Ownership and control is clearly determined as per the extant FDI policy. AIF is a pooled investment vehicle. ‘Control’ of the AIF should be in the hands of ‘sponsors’ and ‘managers/investment managers’, with the general exclusion to others. In case the ‘sponsors and ‘managers/investment managers’ of the AIF are individuals, for the treatment of downstream investment by such AIF as domestic, ‘sponsors’ and ‘managers/investment managers’ should be resident Indian citizens.

Explanation 2: The extent of foreign investment in the corpus of the Investment Vehicle will not be a factor to determine as to whether downstream investment of the Investment Vehicle concerned is foreign investment or not.

5. Downstream investment by an Investment Vehicle that is reckoned as foreign investment shall have to conform to the sectoral caps and conditions / restrictions, if any, as applicable to the company in which the downstream investment is made as per the FDI Policy or Schedule 1 of the principal Regulations.

6. Downstream investment in an LLP by an Investment Vehicle that is reckoned as foreign investment has to conform to the provisions of Schedule 9 of the principal Regulations as well as the extant FDI policy for foreign investment in LLPs.

7. An Alternative Investment Fund Category III with foreign investment shall make portfolio investment in only those securities or instruments in which a Registered Foreign Portfolio Investor is allowed to invest under the principal Regulations.

8. The Investment Vehicle receiving foreign investment shall be required to make such report and in such format to Reserve Bank of India or to SEBI as may be prescribed by them from time to time.”

[ No. 1/1/EM/2016]

B.P. KANUNGO, Principal Chief General Manage

RESERVE BANK OF INDIA

(Foreign Exchange Department)

(CENTRAL OFFICE)

NOTIFICATION No.FEMA.362/2016-RB

Mumbai, the 15th February , 2016

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016

G.S.R. 166 (E) .-In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA. 20/2000-RB dated 3rd May 2000) namely:-

1. Short Title and Commencement

(i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Second Amendment) Regulations, 2016.

(ii) They shall come into force from the date of their publication in the Official Gazette.

2. Amendment of the Regulation

In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA 20/2000-RB dated 3rd May 2000),

(A)  In Regulation 2, after clause (viiA) and before the existing clause (viia), the following clause shall be inserted, namely:

“(vii AA) “Manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.”

(B)  In Regulation 14,   (a) in sub-regulation 1, the existing clause (i) and clause (ia) shall be amended as under respectively :

“ (i) for the purpose of this regulation, the expression ‘ownership and control’ shall mean and include

(a)  a company shall be considered  as owned by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens. A Limited Liability Partnership will be considered as owned by resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/ or entities which are ultimately ‘owned and controlled by resident Indian citizens’ and  such resident Indian citizens and entities have majority of the profit share;

(b) A company owned by non-residents shall mean an Indian company that is not owned by resident Indian citizens.

(ia) ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.

Explanation: For the purpose of Limited Liability Partnership, ‘control’ shall mean right to appoint majority of the designated partners, where such designated partners, with specific exclusions to others, have control over all the policies of Limited Liability Partnership.”

(b) in sub-regulation 3, in clause (iv), the existing sub-clause (D) shall be amended, namely:

“ D) In the I&B sector where the sectoral cap is up to 49%, the company would need to be ‘owned and controlled’ by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens.

(a)For this purpose, the equity held by the largest Indian shareholder would have to be at least 51 % of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in Section 4A of the Companies Act, 1956 or Section 2 (72) of the Companies Act, 2013, as the case may be. The term ‘largest Indian shareholder’, used in this clause, will include any or a combination of the following:

(i) In the case of an individual shareholder,

(aa) The individual shareholder,

(bb) A relative of the shareholder within the meaning of Section 2 (77) of Companies Act, 2013.

(cc) A company/group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest.

(ii) In the case of an Indian company,

(aa) The Indian company

(bb) A group of Indian companies under the same management and ownership control.

(b) For the purpose of this Clause, “Indian company” shall be a company which must have a resident Indian or a relative as defined under Section 2 (77) of Companies Act, 2013/ HUF, either singly or in combination holding at least 51% of the shares.

(c) Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company.”

 (C) The existing sub-regulation 5 shall be amended as under, namely:

“Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens to non-resident entities, in sectors under government approval route 

Foreign investment in sectors/activities under government approval route will be subject to government approval where:

(i) An Indian company is being established with foreign investment and is not owned by a resident entity or

(ii)  An Indian company is being established with foreign investment and is not controlled by a resident entity or

(iii) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by  resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. or

(iv) The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger acquisition etc.

(v)  It is clarified that Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIs, FPIs, QFIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/debentures, regardless of whether the said investments have been made under Schedule 1, 2, 2A, 3, 6, 8, 9 and 10 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations.

(vi) Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000 will be deemed to be domestic investment at par with the investment made by residents.

(vii) A company, trust and partnership firm incorporated outside India and owned and controlled by nonresident Indians will be eligible for investments under Schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations, 2000 and such investment will also be deemed domestic investment at par with the investment made by residents.”

(d)   in sub-regulation 6, the existing clause (ii) shall be amended, namely:

“ (ii) Downstream investments by Indian companies/LLPs will be subject to the following conditions:

a. Such a company/LLP is to notify SIA, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com within 30 days of such investment, even if capital instruments have not been allotted, along with the modality of investment in new/existing ventures (with/without expansion programme);

b. Downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors as also a shareholders agreement, if any;

c. Issue/transfer/pricing/valuation of shares shall be in accordance with applicable SEBI/RBI guidelines;

d. For the purpose of downstream investment, the Indian companies/LLPs making the downstream investments would have to bring in requisite funds from abroad and not leverage funds from the domestic market. This would, however, not preclude downstream companies/LLPs, with operations, from raising debt in the domestic market. Downstream investments through internal accruals are permissible (For the purposes of FDI, internal accruals will mean as profits transferred to reserve account after payment of taxes), subject to the provision of clause (i) above and also as elaborated below:

A. Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company/ies, will require prior Government/FIPB approval, regardless of the amount or extent of foreign investment. Foreign investment into Non-Banking Finance Companies (NBFCs), carrying on activities approved for FDI, will be subject to the conditions specified in Annex B of Schedule I to these Regulations.

B. Those companies, which are Core Investment Companies (CICs), will have to additional follow RBI’s Regulatory Framework for CICs.

C. For undertaking activities which are under automatic route and without FDI linked performance conditions, Indian company which does not have any operations and also does not have any downstream investments, will be permitted to have infusion of foreign investment under automatic route. However, approval of the Government will be required for such companies for infusion of foreign investment for undertaking activities which are under Government route, regardless of the amount or extent of foreign investment. Further, as and when such a company commences business(s) or makes downstream investment, it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps.

 Note: Foreign investment into other Indian companies would be in accordance/compliance with the relevant sectoral conditions on entry route, conditionalities and caps;

e) The FDI recipient Indian company at the first level which is responsible for ensuring compliance with the FDI conditionalities like no indirect foreign investment in prohibited sector, entry route, sectoral cap / conditionalities, etc. for the downstream investment made by in the subsidiary companies at second level and so on and so forth would obtain a certificate to this effect from its statutory auditor on an annual basis as regards status of compliance with the instructions on downstream investment and compliance with FEMA provisions. The fact that statutory auditor has certified that the company is in compliance with the regulations as regards downstream investment and other FEMA prescriptions will be duly mentioned in the Director’s report in the Annual Report of the Indian company. In case statutory auditor has given a qualified report, the same shall be immediately brought to the notice of the Reserve Bank of India, Foreign Exchange Department (FED), Regional Office (RO) of the Reserve Bank in whose jurisdiction the Registered Office of the company is located and shall also obtain acknowledgement from the RO of having intimated it of the qualified auditor report. RO shall file the action taken report to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central Office, Central Office Building, Shahid Bhagat Singh Road, Mumbai 400001.”

C In Schedule 1, 

(i) In paragraph 2, paragraph beginning with “Provided further that the shares or convertible debentures…..” and ending with “…………permitted to the extent specified in Regulation 14.” shall be deleted.

(ii) in paragraph 2, in sub-paragraph 4, after clause (iv), the following shall be added, namely:

“(v) by way of swap of shares, provided the company in which the investment is made is engaged in an automatic route sector, subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.

Note: A company engaged in a sector where foreign investment requires Government approval may issue shares to a non-resident through swap of shares only with approval of the Government”

(iii) in paragraph 3, the existing sub-paragraph (c) shall stands deleted.

(iv) in  ‘Annex B’, the existing table shall be substituted with the following, namely:

Foreign Investments caps and entry route in various sectors

SL. No

Sector/Activity

Foreign Investment Cap (%)

Entry Route

Agriculture
1. Agriculture & Animal Husbandry    
  a) Floriculture, horticulture, Apiculture and Cultivation Of vegetables & mushrooms under controlled conditions;

b) Development and production of seeds and planting ma­terial;

c) Animal Husbandry (including breeding of dogs), Pisiculture, Aquaculture, under controlled conditions; and

d) Services related to agro and allied sectors.

Note :Besides the above, FDI is not allowed in any other agricultural sector/activity

100% Automatic
1.1 Other Conditions    
  The term ‘under controlled conditions’ covers the following:

(i) ‘Cultivation under controlled conditions’ for the categories of floriculture, horticulture, cultivation of vegetables and mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically

(ii) In case of Animal Husbandry, scope of the term ‘under controlled conditions’ covers–

(a) Rearing of animals under intensive farming systems with stall- feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems as prescribed by the National Livestock Policy 2013 and in conformity with the existing ‘Standard Operating Practices and Minimum Standard Protocol.’

(b) Poultry breeding farms and hatcheries where micro-climate is controlled through advanced technologies like incubators, ventilation systems etc.

(iii) In the case of pisciculture and aquaculture, scope of the term ‘under controlled conditions’ covers–

(a) Aquariums

(b) Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control.

(iv) In the case of apiculture, scope of the term ‘‘under controlled conditions’ covers–

a) Production of honey by bee-keeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons.

2. Plantation
2.1 i. Tea sector including tea plantations

ii. Coffee plantations

iii. Rubber Plantations

iv. Cardamom plantations

v. Palm oil tree plantations

vi. Olive oil tree plantations

Note: FDI is not allowed in any plantation sector/activity except those mentioned above.

100% Automatic route
2.2 Other Condition    
  Prior approval of the State Government concerned is required in case of any future land use change.
3. MINING    
3.1 Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957. 100% Automatic
3.2 Coal and Lignite    
  (1) Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973. 100% Automatic
  (2) Setting up coal processing plants like washeries, subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 100% Automatic
3.3 Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities
3.3.1 Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation) Act, 1957. 100% Government
3.3.2 Other Conditions    
  (i) FDI for separation of titanium bearing minerals & ores will be subject to the following conditions viz:

A. Value addition facilities are set up within India along with transfer of technology;

B. Disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.

(ii)FDI will not be allowed in mining of “prescribed substances” listed in the Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of Atomic Energy.

  Clarification:

i. For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition, Ilmenite can be processed to produce Synthetic Rutile or Titanium Slag as an intermediate value added product.

ii. The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled.

4. Petroleum & Natural Gas
4.1 Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. 100% Automatic
4.2 Petroleum refining by the Public Sector Undertakings (PSUs), without any disinvestment or dilution of domestic equity in the existing PSUs. 49% Automatic
5 Manufacturing 100% Automatic
  Subject to the provisions of the FDI policy, foreign investment in ‘manufacturing’ sector is under automatic route. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without Government approval.
6. Defence
6.1 Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951 49% Government route up to 49%

Above 49% under Government route on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country.

6.2 Other Conditions
  i. Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.

ii. Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.

iii. Foreign investment in the sector is subject to security clearance and guidelines of the M/o Defence.

iv. Investee company should be structured to be self-sufficient in areas of product design and development. The investee/joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.

Services Sector
Information Services
7. Broadcasting
7.1 Broadcasting Carriage Services
7.1.1 (1) Teleports (setting up of up-linking HUBs/Teleports);

(2) Direct to Home (DTH);

(3) Cable Networks [Multi System Operators (MSOs)operating at National or State or District level and undertaking up gradation of networks towards digitalization and addressability]:

(4) Mobile TV;

(5) Headend-in-the Sky Broadcasting Service (HITS)

100% Automatic up to 49%

Government route beyond 49%

7.1.2 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)). 100% Automatic up to 49%

Government route beyond 49%

7.2 Broadcasting Content Services    
7.2.1 Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from time to time, by Ministry of Information & Broadcasting, for grant of permission for setting up of FM Radio stations. 49% Government
7.2.2 Up-Linking of ‘News & Current Affairs’ TV Channels 49% Government
7.2.3 Up-linking a Non-’News & Current Affairs’ TV Channels/Down-linking of TV Channels 100% Automatic
7.3 FDI for Up-linking/Down-linking TV Channels will be subject to compliance with the relevant Up-linking/Down-linking Policy notified by the Ministry of Information & Broadcasting from time to time.
7.4 Foreign Investment (FI) in companies engaged in all the aforestated services will be subject to relevant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting.
7.5 The foreign investment (FI) limit in companies engaged in the afore stated activities shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Foreign Portfolio Investors(FPIs), Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), [ Depository Receipts issued under Schedule 10 of these Regulations with equity shares or compulsorily and mandatorily convertible preference shares or compulsory and mandatorily convertible debentures or warrant or any other security in which foreign direct investment can be made in terms of Schedule1 of the principal Regulations, as underlying] (GDRs) and convertible preference shares held by foreign entities.]
7.6 Foreign investment in the aforestated broadcasting carriage services will be subject to the following security conditions/ terms:

Mandatory Requirement for Key Executives of the Company

(i) The majority of Directors on the Board of the Company shall be Indian Citizens.

(ii) The Chief Executive Officer (CEO), Chief Officer In-charge of technical network operations and Chief Security Officer should be resident Indian citizens

Security Clearance of Personnel

(iii) The Company, all Directors on the Board of Directors and such key executives like Managing Director/ Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), shareholders who individually hold 10% or more paid-up capital in the company and any other category, as may be specified by the Ministry of Information and Broadcasting from time to time, shall require to be security cleared.

In case of the appointment of Directors on the Board of the Company and such key executives like Managing Director/Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by the Ministry of Information and Broadcasting from time to time, prior permission of the Ministry of Information and Broadcasting shall have to be obtained.

It shall be obligatory on the part of the company to also take prior permission from the Ministry of Information and Broadcasting before effecting any change in the Board of Directors.

(iv) The Company shall be required to obtain security clearance of all foreign personnel likely to be deployed for more than 60 days in a year by way of appointment, contract, and consultancy or in any other capacity for installation, maintenance, operation or any other services prior to their deployment. The security clearance shall be required to be obtained every two years.

Permission vis-a-vis Security Clearance

(v) The permission shall be subject to permission holder/licensee remaining security cleared throughout the currency of permission. In case the security clearance is withdrawn the permission granted is liable to be terminated forthwith.

(vi) In the event of security clearance of any of the persons associated with the permission holder/licensee or foreign personnel being denied or withdrawn for any reasons whatsoever, the permission holder/licensee will ensure that the concerned person resigns or his services terminated forthwith after receiving such directives from the Government, failing which the permission/license granted shall be revoked and the company shall be disqualified to hold any such Permission/license in future for a period of five years.

Infrastructure/Network/Software related requirement

(vii) The officers/officials of the licensee companies dealing with the lawful interception of Services will be resident Indian citizens.

(viii) Details of infrastructure/ network diagram (technical details of the network) could be provided on a need basis only, to equipment suppliers/manufactures and the affiliate of the licensee company. Clearance from the licensor would be required if such information is to be provided to anybody else.

(ix) The Company shall not transfer the subscribers’ databases to any person/place outside India unless permitted by relevant Law.

(x) The Company must provide traceable identity of their subscribers.

Monitoring, Inspection and Submission of Information

(xi) The Company should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location as and when required by Government.

(xii) The company, at its own costs, shall, on demand by the Government or its authorized representative, provide the necessary equipment, services and facilities at designated place(s) for continuous monitoring or the broadcasting service by or under supervision of the Government or its authorized representative.

(xiii) The Government of India, Ministry of Information & Broadcasting or its authorized representative shall have the right to inspect the broadcasting facilities. No prior permission/intimation shall be required to exercise the right of Government or its authorized representative to carry out the inspection. The company will, if required by the Government or its authorized representative, provide necessary facilities for continuous monitoring for any particular aspect of the company’s activities and operations. Continuous monitoring, however, will be confined only to security related aspects, including screening of objectionable content.

(xiv) The inspection will ordinarily be carried out by the Government of India, Ministry of Information & Broadcasting or its authorized representative after reasonable notice, except in circumstances where giving such a notice will defeat the very purpose of the inspection.

(xv) The company shall submit such information with respect to its services as may be required by the Government or its authorized representative, in the format as may be required, from time to time.

(xvi) The permission holder/licensee shall be liable to furnish the Government of India or its authorized representative or TRAI or its authorized representative, such reports, accounts, estimates, returns or such other relevant information and at such periodic intervals or such times as may be required.

The service providers should familiarize/train designated officials of the Government or officials of TRAI or its authorized representative(s) in respect of relevant operations/features of their systems.

National Security Conditions

(xvii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. The Government of India, Ministry of Information and Broadcasting shall have the right to temporarily suspend the permission of the permission holder/Licensee in public interest or for national security for such period or periods as it may direct. The company shall immediately comply with any directives issued in this regard failing which the permission issued shall be revoked and the company disqualified to hold any such permission, in future, for a period of five years.

(xviii) The company shall not import or utilize any equipment, which are identified as unlawful and/or render network security vulnerable.

Other conditions

(xix) Licensor reserves the right to modify these conditions or incorporate new conditions considered necessary in the interest of national security and public interest or for proper provision of broadcasting services.

(xx) Licensee will ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulation and public policy.

8. Print Media
8.1 Publishing of newspaper and periodicals dealing with news and current affairs 26% Government
8.2 Publication of Indian editions of foreign magazines dealing with news and current affairs 26% Government
8.2.1 Other conditions    
  (i) ‘Magazine’, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news.

(ii) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4-12-2008.

8.3 Publishing/printing of Scientific and Technical Magazines/ specialty journals/periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 100% Government
8.4 Publication of facsimile edition of foreign newspapers 100% Government
8.4.1 Other conditions:    
  (i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India.

(ii) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, as applicable.

(iii) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31-3-2006, as amended from time to time.

9. Civil Aviation
9.1 The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services/Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions.

For the purposes of the Civil Aviation sector:

(i) “Airport” means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934;

(ii) “Aerodrome” means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto;

(iii) “Air transport service” means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights;

(iv) “Air Transport Undertaking” means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward;

(v) “Aircraft component” means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment;

(vi) “Helicopter” means a heavier than air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis;

(vii) “Scheduled air transport service” means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public;

(viii) “Non-Scheduled air Transport service” means any service which is not a scheduled air transport service and will include Cargo airlines;

(ix) “Cargo airlines” would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation;

(x) “Seaplane” means an aeroplane capable normally of taking off from and alighting solely on water;

(xi) “Ground Handling” means (i) ramp handling, (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling.

9.2 Airports    
  (a) Greenfield projects

(b) Existing projects

100%

100%

Automatic

Automatic upto 74% ; Government

Route beyond 74%

9.3 Air Transport Services    
  (a) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline

(b) Regional Air Transport Service

49%

(100% for NRIs)

Automatic
  (2) Non-Scheduled Air Transport Service 100% Automatic
  (3) Helicopter services/ seaplane services requiring DGCA approval 100% Automatic
9.3.1 Other Conditions    
  (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services.

(b) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services, as per the limits and entry routes mentioned above.

(c) Foreign airlines are also allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. Such investment would be subject to the following conditions:

(i) It would be made under the Government approval route.
(ii) The 49% limit will subsume FDI and FII/FPI investment.
(iii) The investments so made would need to comply with the relevant regulations of SEBI, such as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/ Substantial Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules and regulations.
(iv) A Scheduled Operator’s Permit can be granted only to a company:

a) that is registered and has its principal place of business within India;
b) the Chairman and at least two-thirds of the Directors of which are citizens of India; and
c) the substantial ownership and effective control of which is vested in Indian nationals.

(v) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security view point before deployment; and
(vi) All technical equipment that might be imported into India as a result of such investment shall require clearance from the relevant authority in the Ministry of Civil Aviation.

Note: (i) The FDI limits/entry routes, mentioned at paragraph 9.3.1 and 9.3.2 above, are applicable in the situation where there is no investment by foreign airlines.
(ii) The dispensation for NRIs regarding FDI up to 100% will also continue in respect of the investment regime specified at paragraph 9.3.1(c) (ii) above.
(iii) The policy mentioned at 9.3.1(c) above is not applicable to M/s Air India Limited

9.3.2 Foreign Airlines in the capital of the Indian companies, operating schedule and non-scheduled air transport services 49% (100% for NRIs) Government
9.4 Other Services under Civil Aviation sector    
  (1) Ground Handling Services subject to sectoral regulations and security clearance 100% Automatic
  (2) Maintenance and Repair organizations; flying training institutes and technical training institutions 100% Automatic
10. Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898 and excluding the activity relating to the distribution of letters 100% Automatic
11. Construction Development: Townships, Housing, Built-up infrastructure
11.1 Construction-development projects (which would include development of townships, construction of residential/commercial premises, roads or bridges, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure, townships) 100% Automatic
11.2 Each phase of the construction development project would be considered as a separate project for the purposes of FDI policy. Investment will be subject to the following conditions:

(A) (i) The investor will be permitted to exit on completion of the project or after development of trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage.

(ii) Notwithstanding anything contained at (A) (i) above, a foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche’ of foreign investment has been completed. Further, transfer of stake from one non-resident to another non- resident, without repatriation of investment will neither be subject to any lock-in period nor to any government approval.

(B) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned.

(C) The Indian investee company will be permitted to sell only developed plots. For the purposes of this policy “developed plots” will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available.

(D) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-Laws/regulations of the State Government/Municipal/Local Body concerned.

(E) The State Government/Municipal/Local Body concerned, which approves the building/development plans, will monitor compliance of the above conditions by the developer.

Note:

i. It is clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs).

“Real estate business” means dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent income on lease of the property, not amounting to transfer, will not amount to real estate business.

ii. Condition of lock-in period at (A) above will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs.

iii. Completion of the project will be determined as per the local bye-laws/rules and other regulations of State Governments.

iv. It is clarified that 100 % FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period.

v. “Transfer”, in relation to FDI policy on the sector, includes,-

a. the sale, exchange or relinquishment of the asset; or

b. the extinguishment of any rights therein; or

c. the compulsory acquisition thereof under any law; or

d. any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or

e. any transaction, by acquiring shares in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

12. Industrial Parks -New and existing 100% Automatic
12.1 (i) “Industrial Park” is a project in which quality infrastructure in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity.

(ii) “Infrastructure” refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), railway line/sidings including electrified railway lines and connectivities to the main railway line, water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning.

(iii) “Common Facilities” refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), railway line/sidings including electrified railway lines and connectivities to the main railway line, water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park.

(iv) “Allocable area” in the Industrial Park means-

(a) in the case of plots of developed land – the net site area available for allocation to the units, excluding the area for common facilities.

(b) in the case of built up space – the floor area and built-up space utilized for providing common facilities.

(c) in the case of a combination of developed land and built-up space – the net site and floor area available for allocation to the units excluding the site area and built-up space utilized for providing common facilities.

(v) “Industrial Activity” means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied R&D on bio-technology, pharmaceutical sciences/life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities.

12.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 11 above, provided the Industrial Parks meet with the under-mentioned conditions:

(i) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area;

(ii) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area.

13. Satellites – Establishment and operation    
13.1 Satellites Establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO 100% Government
14. Private Security Agencies 49% Government
15. Telecom services
(including Telecom Infrastructure Providers Category-l)

All telecom services including Telecom Infrastructure Providers Category-I, viz. Basic, Cellular, United Access Services, Unified license (Access services), Unified License, National/ International Long Distance, Commercial V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS), All types of ISP licenses, Voice Mail/Audiotex / UMS, Resale of IPLC, Mobile Number Portability services, Infrastructure Provider Category-I (providing dark fibre, right of way, duct space, tower) except Other Service Providers.
100% Automatic upto 49%

Government route beyond 49%

15.1.1 Other Condition    
  FDI up to 100% with 49% on the automatic route and beyond 49% on the government route subject to observance of licensing and security conditions by licensee as well as investors as notified by the Department of Telecommunications (DoT) from time to time, except “Other Service Providers”, which are allowed 100% FDI on the automatic route.
16. Trading    
16.1 (i) Cash & Carry Wholesale Trading/Wholesale Trading (including sourcing from MSEs) 100% Automatic
16.1.1 Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, imply sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ ex-bonded warehouse business sales and B2B e-Commerce.
16.1.2 Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT):

(a) For undertaking ‘WT’, requisite licenses/registration/permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority /Local Self-Government Body under that State Government should be obtained.

(b) Except in case of sales to Government, sales made by the wholesaler would be considered as ‘cash & carry wholesale trading/wholesale trading’ with valid business customers, only when WT are made to the following entities:

(i) Entities holding sales tax/VAT registration/service tax/excise duty registration; or

(ii) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/registration certificate/membership certificate, as the case may be, is itself/himself/herself engaged in a business involving commercial activity; or

(iii) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or

(iv) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption.

Note: An Entity, to whom WT is made, may fulfil anyone of the 4 conditions.

(c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/ license/permit etc. number, amount of sale etc. should be maintained on a day to day basis.

(d) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture.

(e) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations.

(f) A wholesale/cash & carry trader can undertake single brand retail trading, subject to the conditions mentioned in para 16.3. An entity undertaking wholesale/cash and carry as well as retail business will be mandated to maintain separate books of accounts for these two arms of the business and duly audited by the statutory auditors. Conditions of the FDI policy for wholesale/cash and carry business and for retail business have to be separately complied with by the respective business arms.

16.2 B2B E-commerce activities 100% Automatic
  E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter alia implying that existing restrictions on FDI in domestic trading would be applicable to e­commerce as well.
16.3 Single Brand product retail trading 100% Automatic up to 49%. Government route beyond 49%
  1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices.

2) FDI in Single Brand product retail trading would be subject to the following conditions:

a) Products to be sold should be of a ‘Single Brand’ only.

b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

c) Single Brand’ product-retail trading would cover only products which are branded during manufacturing. A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, directly or through a legally tenable agreement with the· brand owner for undertaking single brand product retail trading. The onus for ensuring compliance with this condition will rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/franchise/sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and SIA/FIPB for cases involving approval.

d) In respect of proposals involving FDI beyond 51%, sourcing of 30 of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met annually from the commencement of the business i.e. opening of the first store. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of Foreign Investment for the purpose of carrying out single-brand product retail trading.

e) Subject to the conditions mentioned in this Para, a single brand retail trading entity operating through brick and mortar stores, is permitted to undertake retail trading through e-commerce.

3) Application seeking permission of the Government for FDI exceeding 49 in a company which proposes to undertake single brand retail trading in India would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The applications would specifically indicate the product/product categories which are proposed to be sold under a ‘Single Brand’. Any addition to the product/product categories to be sold under ‘Single Brand’ would require a fresh approval of the Government. In case of FDI up to 49 %, the list of products/product categories proposed to be sold except food products would be provided to the RBI.

4) Applications would be’ processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval.

Note:

i. Conditions mentioned at Para (2) (b) & (2) (d) will not be applicable for undertaking SBRT of Indian brands.

ii. An Indian manufacturer is permitted to sell its own branded products in any manner i.e. wholesale, retail, including through e-commerce platforms.

iii. Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70% of its products in house, and sources, at most 30% from Indian manufacturers.

iv. Indian brands should be owned and controlled by resident Indian citizens and/or companies which are owned and controlled by resident Indian citizens.

v. Government may relax sourcing norms for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology and where local sourcing is not possible.

16.4 Multi Brand Retail Trading 51% Government
  (1) FDI in multi brand retail trading, in all products, will be permitted, subject to the following conditions:

(i) Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

(ii) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million.

(iii) At least 50% of total FDI brought in the first tranche of US $ 100 million, shall be invested in ‘back-end infrastructure’ within three years, where ‘back-end infrastructure’ will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back-end infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements.

(iv) At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant & machinery not exceeding US $ 2.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. The ‘small industry’ status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a ‘small industry’ for this purpose, even if it outgrows the said investment of US $ 2.00 million during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years total value of the manufactured/processed products purchased, beginning lst April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis.

(v) Self-certification by the company, to ensure compliance of the conditions at serial Nos. (i), (ii) and (iv) above, which could be cross-checked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors.

(vi) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms. Around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking.

(vii) Government will have the first right to procurement of agricultural products.

(viii) The above policy is an enabling policy only and the State Governments/Union Territories would be free to take their own decisions in regard to implementation of the policy. Therefore, retail sales outlets may be set up in those States/Union Territories which have agreed, or agree in future, to allow FDI in MBRT under this policy. The list of States/Union Territories which have conveyed their agreement is at (2) below. Such agreement, in future, to permit establishment of retail outlets under this policy, would be conveyed to the Government of India through the Department of Industrial Policy & Promotion and additions would be made to the list at (2) below accordingly. The establishment of the retail sales outlets will be in compliance of applicable State/Union Territory laws/ regulations, such as the Shops and Establishments Act etc.

(ix) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading.

(x) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval.

(2) List of States/Union Territories as mentioned in Paragraph 16.4.(1) (viii)

1. Andhra Pradesh
2. Assam
3. Delhi
4. Haryana
5. Himachal Pradesh
6. Jammu & Kashmir
7. Karnataka
8. Maharashtra
9. Manipur
10. Rajasthan
11. Uttarakhand
12. Daman & Diu and Dadra and Nagar Haveli (Union Territories)

16.5 Duty Free Shops 100% Automatic
  (i) Duty Free Shops would mean shops set up in custom bonded area at International Airports/ International Seaports and Land Custom Stations where there is transit of international passengers.

(ii) Foreign investment in Duty Free Shops is subject to compliance of conditions stipulated under the Customs Act, 1962 and other laws, rules and regulations.

(iii) Duty Free Shop entity shall not engage into any retail trading activity in the Domestic Tariff Area of the country.

  FINANCIAL SERVICES

Foreign investment in other financial services, other than those indicated below, would require prior approval of the Government:

F.1 Asset Reconstruction Companies    
F.1.1 ‘Asset Reconstruction Company’ (ARC) means a company registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). 100% Automatic up to 49%
Government route beyond 49%
F.1.1.2 Other Conditions

(i) Persons resident outside India can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank, up to 49% on the automatic route, and beyond 49% on the Government route.

(ii) No sponsor may hold more than 50% of the shareholding in an ARC either by way of FDI or by routing it through an FII/FPI controlled by the single sponsor.

(iii) The total shareholding of an individual FII/FPI shall be below 10% of the total paid-up capital.

(iv) FIIs/FPIs can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs/FPIs can invest up to 74 per cent of each tranche of scheme of SRs. Such investment should be within the FII/FPI limit on corporate bonds prescribed from time to time, and sectoral caps under extant FDI Regulations should also be complied with.

(v) All investments would be subject to provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

F.2 Banking – Private sector    
F.2.1 Banking – Private sector 74% Automatic upto 49%
Government route beyond 49% and upto 74%
F.2.2 Other conditions:    
  1) This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FIIs/FPIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs, and shall continue to include investment made by non-residents under IPOs, Private placements, DRs and through acquisition of shares from existing shareholders

2) The aggregate foreign investment in a private bank from all sources will be allowed – up to a maximum of 74 per cent of the paid-up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank.

3) The stipulations as above will be applicable to all investments in existing private sector banks also.

4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs/FPIs and NRIs will be as follows:

(i) In the case of FIIs/FPIs, as hitherto, individual FII/FPI holding is restricted to below 10 per cent of the total paid-up capital, aggregate limit for all FIIs/FPIs/QFIs cannot exceed 24 per cent of the total paid-up capital, which can be raised up to sectoral limit of 74 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body.

a. In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non-repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non- repatriation basis provided the banking company passes a special resolution to that effect in the General Body.

b. Applications for foreign direct investment in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) in order to ensure that the 49 per cent limit of foreign shareholding applicable for the insurance sector is not being breached.

c. Transfer of shares under FDI from residents to non-residents will continue to require approval of RBI and Government as per Regulation 14 (5) as applicable.

d. The policies and procedures prescribed from time to time by RBI and other institutions such as SEBI, Ministry of Corporate Affairs and IRDAI on these matters will continue to apply.

e. RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid up capital of the private bank will apply to non- resident investors as well.

(ii) Setting up of a subsidiary by foreign banks

(a) Foreign banks will be permitted to either have branches or subsidiaries but not both.

(b) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank’s licensing criteria will be allowed to hold 100 per cent paid-up capital to enable them to set up a wholly-owned subsidiary in India.

(c) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 per cent in a private bank.

(d) A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or through a fresh banking license. A foreign bank will be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 per cent of the paid-up capital of the private sector bank is held by residents at all times consistent with para (i) (b) above.

(e) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks.

(f) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI.

(g) All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI.

(iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals.

F.3 Banking – Public Sector    
F.3.1 Banking – Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts, 1970/80.

This ceiling (20%) is also applicable to the State Bank of India and its associate banks.

20% Government
F.4 Commodity Exchanges    
F.4.1 1. Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges.

2. For the purposes of this Chapter,

(i) “Commodity Exchange” is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities.

(ii) “Recognized association” means an association to which recognition for the time being has been granted by the Central Government under section 6 of the Forward Contracts (Regulation) Act, 1952.

(iii) “Association” means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative.

(iv) “Forward contract” means a contract for the delivery of goods and which is not a ready delivery contract.

(v) “Commodity derivative” means-

• a contract for delivery of goods, which is not a ready delivery contract; or

• a contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the SEBI by the Central Government, but does not include securities.

F.4.2 Commodity Exchange 49% Automatic
F.4.3 Other conditions:

(i) FII/FPI purchases shall be restricted to secondary market only.

(ii) No non-resident investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies.

(iii) Foreign investment in commodity exchanges will be subject to the guidelines of the Central Government / SEBI from time to time.

F.5 Credit Information Companies (CIC)    
F.5.1 Credit Information Companies 100% Automatic
F.5.2 Other Conditions:

(1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005.

(2) Foreign investment is permitted subject to regulatory clearance from RBI.

(3) Such FII/FPI investment would be permitted subject to the conditions that:

(a) A single entity should directly or indirectly hold below 10% equity;

(b) Any acquisition in excess of 1 % will have to be reported to RBI as a mandatory requirement; and

(c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

F.6 Infrastructure Company in the Securities Market    
F.6.1 Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% Automatic
F.6.2 Other Conditions:    
F.6.2.1 FII/FPI can invest only through purchases in the secondary market    
F.7. Insurance    
F.7.1 Insurance

(i) Insurance Company
(ii) Insurance Brokers
(iii) Third Party Administrators
(iv) Surveyors and Loss Assessors
(v) Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999)

49% Automatic upto 26%,; Government route beyond 26% and upto 49%
F.7.2 Other Conditions:

(a) No Indian insurance company shall allow the aggregate holdings by way of total foreign investment in its equity shares by foreign investors, including portfolio investors, to exceed forty-nine percent of the paid up equity capital of such Indian insurance company.

(b) Foreign direct investment proposals which take the total foreign investment in the Indian insurance company above 26 percent and up to the cap of 49 percent shall be under Government route.

(c) Foreign investment in the sector is subject to compliance of the provisions of the Insurance Act, 1938 and the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority of India for undertaking insurance activities.

(d) An Indian insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian entities as determined/notified by Department of Fianncial Services.

(e) Foreign portfolio investment in an Indian insurance company shall be governed by the provisions contained in sub-regulations (2), (2A), (3) and (8) of regulation 5 of FEMA Regulations, 2000 and provisions of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations.

(f) Any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by Reserve Bank of India under the FEMA.

(g) The foreign equity investment cap of 49 percent shall apply on the same terms as above to Insurance Brokers, Third Party Administrators, Surveyors and Loss Assessors and Other Insurance Intermediaries appointed under the provisions of the Insurance Regulatory and Development Authority Act,1999 (41 of 1999).

(h) Provided that where an entity like a bank, whose primary business is outside the insurance area, is allowed by the Insurance Regulatory and Development Authority of India to function as an insurance intermediary, the foreign equity investment caps applicable in that sector shall continue to apply, subject to the condition that the revenues of such entities from their primary (i.e. non-insurance related) business must remain above 50 percent of their total revenues in any financial year.

(i) The provisions of paragraphs F.2.2 (3) (i) (c) & (e), relating to ‘Banking-Private Sector’, shall be applicable in respect of bank promoted insurance companies.

(j) Terms ‘Control’, ‘Equity Share Capital’, ‘Foreign Direct Investment’ (FDI), ‘Foreign Investors’, ‘Foreign Portfolio Investment’, ‘Indian Insurance Company’, ‘Indian Company’, ‘Indian Control of an Indian Insurance Company’, ‘Indian Ownership’, ‘Non-resident Entity’, ‘Public Financial Institution’, ‘Resident Indian Citizen’, ‘Total Foreign Investment’ will have the same meaning as provided in Notification No. G.S.R 115 (E), dated 19th February, 2015.

F.8. Non-Banking Finance Companies (NBFCs)    
F.8.1 Foreign investment in NBFC is allowed under the automatic route in only the following activities:

(i) Merchant Banking
(ii) Underwriting
(iii) Portfolio Management Services
(iv) Investment Advisory Services
(v) Financial Consultancy
(vi) Stock Broking
(vii) Asset Management
(viii) Venture Capital
(ix) Custodian Services
(x) Factoring
(xi) Credit Rating Agencies
(xii) Leasing & Finance
(xiii) Housing Finance
(xiv) Forex Broking
(xv) Credit Card Business
(xvi) Money Changing Business
(xvii) Micro Credit
(xviii) Rural Credit

100% Automatic
F.8.2 Other Conditions    
  (1) Investment would be subject to the following minimum capitalisation norms:

(i) US $0.5 million for foreign capital up to 51 % to be brought upfront.

(ii) US $ 5 million for foreign capital more than 51 % and up to 75% to be brought upfront.

(iii) US $ 50 million for foreign capital more than 75% out of which US $ 7.5 million to be brought upfront and the balance in 24 months.

(iv) NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1 of DIPP Circular 1 on Consolidated FDI Policy, therefore, shall not apply to downstream subsidiaries.

(v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below.

(vi) Non-Fund based activities: US$ 0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition:

It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company.

Note: The following activities would be classified as Non-Fund Based activities:

(a) Investment Advisory Services

(b) Financial Consultancy

(c) Forex Broking

(d) Money Changing Business

(e) Credit Rating Agencies

(vii) This will be subject to compliance with the guidelines of RBI.

Note: (i) Credit Card business includes issuance, sales, marketing & design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc.

(ii) Leasing & Finance covers only financial leases and not operating leases.

FDI in operating leases is permitted up to 100 % on the automatic route.

(2) The NBFC will have to comply with the guidelines of the relevant regulator/s, as applicable.

F.8.3 White Label ATM Operations 100% Automatic
  Other Conditions:

i. Any non-bank entity intending to set up a WLAs should have a minimum net worth of ₹ 100 crore as per the latest financial year’s audited balance sheet, which is to be maintained at all times.

ii. In case the entity is also engaged in any other 18 NBFC activities, then the foreign investment in the company setting up WLA, shall have to comply with the minimum capitalisation norms for foreign investment in NBFC activities, as provided in para F.8.2.

iii. FDI in the WLAO will be subject to the specific criteria and guidelines issued by RBI vide Circular No. DPSS,CO.PD.No.2298/02.10.002/2011-12, as amended from time to time.

F.9 Power Exchanges    
F.9.1 Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 49% Automatic
F.9.2 Other conditions    
  (i) FII purchases shall be restricted to secondary market only;

(ii) No non-resident investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies; and

(iii) The foreign investment would be in compliance with SEBI Regulations; other applicable laws/regulations; security and other conditionalities.

   
F.10 Pension Sector 49% Automatic up to 26%; Government route beyond 26% and up to 49 %
17. Pharmaceuticals    
17.1 Greenfield 100% Automatic
17.2 Brown Field 100% Government
17.3 Other Conditions
  (i) ‘Non-compete’ clause would not be allowed except in special circumstances with the approval of the Foreign Investment Promotion Board.

(ii) The prospective investor and the prospective investee are required to provide a certificate along with the FIPB application.

(iii) Government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting approval.

Note :

i. FDI upto 100% under the automatic route is permitted for manufacturing of medical devices. The abovementioned conditions will, therefore, not be applicable to greenfield as well as brownfield projects of this industry.

ii. Medical device means :-

a) Any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of :-

(aa) Diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;
(ab) diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or handicap;
(ac) investigation, replacement or modification or support of the anatomy or of a physiological process;
(ad) supporting or sustaining life;
(ae) disinfection of medical devices;
(af) control of conception;

and which does not achieve its primary intended action in or on the human body or animals by any pharmacological or immunological or metabolic means, but which may be assisted in its intended function by such means;

b) an accessory to such an instrument, apparatus, appliance, material or other article;

c) a device which is reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of in vitro examination of specimens derived from the human body or animals.

iii. The definition of medical device at Note (ii) above would be subject to the amendment in Drugs and Cosmetics Act.

18 Railway Infrastructure    
  Construction, operation and maintenance of the following:

(i) Suburban corridor projects through PPP, (ii) speed train projects, (iii) Dedicated freight lines, (iv) Rolling stock including train sets, and locomotives/coaches manufacturing and maintenance facilities, (v) Railway Electrification, (vi) Signaling systems, (vii) Freight terminals, (viii) Passenger terminals, (ix) Infrastructure in industrial park pertaining to railway line/sidings including electrified railway lines and connectivities to main railway line and (x) Mass Rapid Transport Systems.

100% Automatic
  Note:-

(i) Foreign Direct Investment in the abovementioned activities open to private participation including FDI is subject to sectoral guidelines of Ministry of Railways.

(ii) Proposals involving FDI beyond 49% in sensitive areas from security point of view, will be brought by the Ministry of Railways before the Cabinet Committee on Security (CCS) for consideration on a case to case basis.

D. In Schedule 9,

(i) the existing paragraph 4 shall be amended as under, namely:  

“ 4. Entry Route

FDI in LLPs is permitted, subject to the following conditions:

i. FDI is permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed through the automatic route and there are no FDI linked performance conditions.

ii. An Indian company or an LLP, having foreign investment, will be permitted to make downstream investment in another company or LLP engaged in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions. Onus shall be on the Indian company/ LLP accepting downstream investment to ensure compliance with the above conditions.

iii. FDI in LLP is subject to the compliance of the conditions of LLP Act, 2008.”

(ii) the existing paragraph 8 shall stands deleted.  

  E.       The existing Schedule 11 shall be substituted by the following, namely: 

“Schedule 11

[See Regulation 5(10)]

Investment by a person resident outside India in an Investment Vehicle

1. A person resident outside India including an RFPI and an NRI may invest in units of Investment Vehicles subject to the conditions laid down in this Schedule.

2. The payment for the units of an Investment Vehicle acquired by a person resident or registered / incorporated outside India shall be made by an inward remittance through the normal banking channel including by debit to an NRE or an FCNR account.

3. A person resident outside India who has acquired or purchased units in accordance with this Schedule may sell or transfer in any manner or redeem the units as per regulations framed by SEBI or directions issued by RBI.

4. Downstream investment by an Investment Vehicle shall be regarded as foreign investment if either the Sponsor or the Manager or the Investment Manager is not Indian ‘owned and controlled’ as defined in Regulation 14 of the principal Regulations.

Provided that for sponsors or managers or investment managers organized in a form other than companies or LLPs, SEBI shall determine whether the sponsor or manager or investment manager is foreign owned and controlled.

Explanation 1: Ownership and control is clearly determined as per the extant FDI policy. AIF is a pooled investment vehicle. ‘Control’ of the AIF should be in the hands of ‘sponsors’ and ‘managers/investment managers’, with the general exclusion to others. In case the ‘sponsors and ‘managers/investment managers’ of the AIF are individuals, for the treatment of downstream investment by such AIF as domestic, ‘sponsors’ and ‘managers/investment managers’ should be resident Indian citizens.

Explanation 2: The extent of foreign investment in the corpus of the Investment Vehicle will not be a factor to determine as to whether downstream investment of the Investment Vehicle concerned is foreign investment or not.

5. Downstream investment by an Investment Vehicle that is reckoned as foreign investment shall have to conform to the sectoral caps and conditions / restrictions, if any, as applicable to the company in which the downstream investment is made as per the FDI Policy or Schedule 1 of the principal Regulations.

6. Downstream investment in an LLP by an Investment Vehicle that is reckoned as foreign investment has to conform to the provisions of Schedule 9 of the principal Regulations as well as the extant FDI policy for foreign investment in LLPs.

7. An Alternative Investment Fund Category III with foreign investment shall make portfolio investment in only those securities or instruments in which a Registered Foreign Portfolio Investor is allowed to invest under the principal Regulations.

8. The Investment Vehicle receiving foreign investment shall be required to make such report and in such format to Reserve Bank of India or to SEBI as may be prescribed by them from time to time.”

[ No. 1/1/EM/2016]

B.P. KANUNGO, Principal Chief General Manager

 

Notification No. : 361/2016-RB Dated: 15-2-2016


Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2016 – 361/2016-RB – Dated 15-2-2016 – Foreign Exchange Management

RESERVE BANK OF INDIA

(Foreign Exchange Department)

(CENTRAL OFFICE)

NOTIFICATION No.FEMA.361/2016-RB

Mumbai, the 15th  February , 2016

Foreign Exchange Management (Transfer or Issue of Security by a Person  Resident outside India) (Amendment) Regulations, 2016

G.S.R. 165 (E).-In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 (Notification No. FEMA. 20/2000-RB dated 3rd May 2000) namely:-

1. Short Title & Commencement

(i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2016.

(ii) They shall come into force from the date of their publication in the Official Gazette.

2. Amendment of the Regulation

In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No. FEMA 20/2000-RB dated 3rd May 2000),

A. In Regulation 2,  the existing clause (viia) shall be substituted, namely:

“(viia) Non-Resident Indian (NRI) means an individual resident outside India who is citizen of India or is an ‘Overseas Citizen of India’ cardholder within the meaning of section 7 (A) of the Citizenship Act, 1955.”

B. Regulation 5 (3) shall be substituted, namely

“(i) A Non- Resident Indian (NRI) may acquire securities or units on a Stock Exchange in India on repatriation basis under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3.

(ii) A Non- Resident Indian (NRI) may acquire securities or units on a non-repatriation basis, subject to the terms and conditions specified in Schedule 4.

C. Schedule 3 shall be substituted, namely

“Schedule-3

[See Regulation 5(3) (i)]

Acquisition of Securities or Units by

a Non-Resident Indian (NRI) on a Stock Exchange in India on Repatriation basis under the Portfolio Investment Scheme

1. A Non-resident Indian (NRI) may purchase or sell shares, convertible preference shares, convertible debentures and warrants of an Indian company or units of an investment vehicle, on repatriation basis, on a recognised stock exchange, subject to the following conditions:

a. NRIs may purchase and sell shares /convertible preference shares/ convertible debentures /warrants and units under the Portfolio Investment Scheme through a branch designated by an Authorised Dealer for the purpose;

b. The paid-up value of shares of an Indian company purchased by any individual NRI should not exceed  five percent of the paid-up value of shares issued by the company concerned;

c. the paid-up value of convertible preference shares or convertible debentures of any series purchased by any individual NRI on repatriation basis should not exceed five percent of the paid-up value of convertible preference shares or convertible debentures of that series issued by the company concerned;

d. the paid-up value of warrants of any series purchased by any individual NRI on repatriation basis should not exceed five percent of the paid-up value of warrants of that series issued by the company concerned;

e. the aggregate paid-up value of shares of any company purchased by all NRIs on repatriation basis should not exceed ten percent of the paid-up value of shares of the company and the aggregate paid-up value of each series of convertible preference shares or convertible debentures or warrants purchased by all NRIs should not exceed ten percent of the paid-up value of that series of convertible preference shares or convertible debentures or warrants;

Provided that the aggregate ceiling of ten per cent referred to in this clause may be raised to twenty-four per cent if a special resolution to that effect is passed by the General Body of the Indian company concerned;

f. The NRI investor should take delivery of the shares/convertible preference shares/ convertible debentures /warrants and units purchased and give delivery of the same when sold;

g. The investment shall be subject to the provisions of the FDI policy and Schedule 1 of these Regulations in respect of sectoral caps wherever applicable.

Explanation: ‘Investment Vehicles’ and ‘Units’ and shall have the same meaning as defined in sub-regulation (ii g) and (xi A) of Regulation 2 of these Regulations.

2. Report to Reserve Bank 

The reporting of transactions under this Schedule shall be made by the designated branch of the Authorised Dealer referred to in paragraph 1, in a manner specified by Reserve Bank of India.

3. Maintenance of accounts by an NRI for routing transactions for purchase and sale of shares / convertible debentures/ units, etc.

An NRI may open a designated NRE account (opened and maintained by Authorised Dealer bank in terms of theForeign Exchange Management (Deposit) Regulations, 2000) for the purpose of investment under this scheme with a designated branch of an Authorized Dealer bank referred to in paragraph 1, for routing the receipt and payment for transactions relating to sale and purchase of shares /convertible preference shares/ convertible debentures/ warrants/ units under this Schedule. The designated account will be called an NRE (PIS) Account.

The designated branch shall ensure that sale proceeds of securities or units which have been acquired by modes other than Portfolio Investment Scheme such as underlying shares acquired on conversion of ADRs / GDRs, shares / convertible preference shares / convertible debentures /warrants acquired under FDI Scheme or purchased outside India from other NRIs or acquired under private arrangement from residents/non-residents or purchased while resident in India, do not get credited in the NRE (PIS) Account and vice-versa.

4. Permitted Credits/ Debits in NRE(PIS)account Credits

a. Inward remittances in foreign exchange though normal banking channels;

b. Transfer from the NRI’s other NRE accounts or FCNR (B) accounts maintained with Authorised Dealer in India;

c. Net sale proceeds (after payment of applicable taxes) of shares / convertible preference shares /convertible debentures /warrants/ units acquired on repatriation basis under the Scheme and sold on stock exchange through registered broker; and

d. Dividend or income earned on investment made on repatriation basis under the Scheme

Debits

a. Outward remittances of dividend or income earned;

b. Amounts paid on account of purchase of shares /convertible preference shares/ convertible debentures / warrants/ units on repatriation basis on stock exchanges through registered broker under the Scheme; and

c. Any charges on account of sale / purchase of securities or units under the Scheme.

d. Remittances outside India or transfer to NRE / FCNR (B) accounts of the account holder of the NRI or any other person eligible to maintain such account.

5. Saving

The existing NRO (PIS) accounts may be re-designated as NRO account.”

D. Schedule 4 shall be substituted, namely

“Schedule-4

[See Regulation 5(3) (ii)]

Acquisition of Securities or units by a Non-Resident Indian (NRI), on Non-Repatriation basis

Permission to purchase

1. A Non-resident Indian (NRI), including a company, a trust and a partnership firm incorporated outside India and owned and controlled by non-resident Indians, may acquire and hold, on non-repatriation basis, equity shares, convertible preference shares, convertible debenture, warrants or units, which will be deemed to be domestic investment at par with the investment made by residents. Without loss of generality, it is stated that

a. An NRI may acquire, on non-repatriation basis, any security issued by a company without any limit either on the stock exchange or outside it.

b. An NRI may invest, on non-repartition basis, in units issued by an investment vehicle without any limit, either on the stock exchange or outside it.

c. An NRI may contribute, on non-repatriation basis, to the capital of a partnership firm, a proprietary firm or a Limited Liability Partnership without any limit.

Explanation: ‘Investment Vehicles’ and ‘Units’ and ‘shall have the same meaning as defined in sub-regulation (ii g) and (xi A) of Regulation 2 of these Regulations.

Prohibition on purchase 

2. Notwithstanding what has been stated in paragraph 1, an NRI shall not make any investment, under this Schedule, in equity shares, convertible preference shares, convertible debenture, warrants or units of a Nidhi company or a company engaged in agricultural/plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights.

Explanation: For the purpose of this paragraph, “Real estate business” means dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent income on lease of the property, not amounting to transfer, will not amount to “real estate business”. Investment in units of Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) regulations 2014 shall also be excluded from the definition of “real estate business”.

Method of payment for purchase 

3. The consideration for investment under this Schedule shall be paid by way of inward remittance through normal banking channel from abroad or out of funds held in NRE/FCNR/NRO account maintained with a bank in India:

Sale/ Maturity proceeds 

4. The sale/maturity proceeds (net of applicable taxes) of the securities or units acquired under this Schedule shall be credited only to NRO account irrespective of the type of account from which the considerations for acquisition were paid.

5. The amount invested under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated abroad. ”

[ No. 1/1/EM/2016]

 B.P. KANUNGO, Principal Chief General Manager

No. 01/2016 Dated: 15-2-2016


Following the prescribed time-limit in passing order under sub-section (8) of section 154 of Income-tax Act, 1961 – Order-Instruction – Dated 15-2-2016 – Income Tax

Instruction No. 01/2016

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

North Block, New Delhi, the 15th of February, 2016

Subject: Following the prescribed time-limit in passing order under sub-section (8) of section 154 of Income-tax Act, 1961-regd.

Sub-section (8) of section 154 of the Income-tax Act, 1961 (‘Act’) stipulates that where an application for amendment is made by assessee/deductor/collector with a view to rectify any mistake apparent from record, the income-tax authority concerned shall pass an order, within a period of six months from the end of the month in which such an application is received, by either making the amendment or refusing to allow the claim. It has been brought to the notice of the Board that the said time-limit of six months has not been observed in deciding some applications. In such cases, the field authorities often take a view that since no action was taken within the prescribed time-frame, the application of the taxpayer is deemed to have lapsed, thereby not requiring any action.

2.  The matter has been examined by the Board. In this regard, the undersigned is directed to convey that the aforesaid time-limit of six months is to be strictly followed by the Assessing Officer while disposing applications filed by the assessee/deductor/collector under section 154 of the Act. The supervisory officers should monitor the adherence of prescribed time limit and suitable administrative action may be initiated in cases where failure to adhere to the prescribed time frame is noticed.

3.  The contents of this Instruction may be brought to the notice of all for necessary compliance.

4.   Hindi version to follow.

(Rohit  Garg)

Deputy Secretary to the Government of India

(F. N o. 225/305/2015-ITA.II)

Notification No. : 4/2016 Dated: 15-2-2016


Service Tax and Central Excise (Furnishing of Annual Information Return) Rules, 2016 – 4/2016 – Dated 15-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF EXCISE AND CUSTOMS

NOTIFICATION NO.  04/2016-SERVICE TAX

New Delhi, the 15th February 2016

26 Magha, 1937 Saka

G.S.R (E).- In exercise of the powers conferred by section 15A, read with section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94, read with section 83 of the Finance Act,1994 (32 of 1994), the Central Government hereby makes the following rules , namely:-

1.  Short title and commencement.-

(1) These rules may be called the Service Tax and Central Excise (Furnishing of Annual Information Return) Rules, 2016.

(2) They shall come into force from the 1st day of April, 2016.

2. Definitions.-

(1) In these rules, unless the context otherwise requires,-

(a)    “Aggregate value of clearances” has the same meaning as assigned to it in the notification of the Government of India in the Ministry of Finance, Department of Revenue  No. 9/2003-Central Excise dated the 1st March 2003, published vide number G.S.R. 139, dated the 1st March , 2003;

(b)  “Board” means the Central Board of Excise and Customs constituted under the Central Board of Revenue Act, 1963 (54 of 1963);

(c)  “Digital signature” has the same meaning as assigned to it in the Information Technology Act, 2000 ( 21 of 2000);

(d)  “Form” means Form appended to these rules.

(2)   Words and expressions used herein and not defined but defined in the Finance Act, 1994 (32 of 1994) and the Central Excise Act, 1944 (1 of 1944) and the rules made thereunder, shall have the meanings respectively assigned to them in those Acts and rules.

3. Annual information return to be furnished.-The information return required to be furnished under sub-section (1) of section 15A of Central Excise Act, 1944 shall be furnished annually by every person mentioned in column (2) of the Table below in respect of all transactions of the nature and value specified in the corresponding entry in column (3) of the said Table, recorded or received by him during every financial year beginning on or after the 1st day of April, 2015, in the Form AIRF, along with the Annexure to the said Form, as  specified in column (4) of the said Table, namely:-

Sl. No.

Class of person

Nature and value of transaction

Annexure to Form AIRF

(1)

(2)

(3)

(4)

1 An officer of the Reserve Bank of India constituted under  section 3 of the Reserve Bank of India Act, 1934, who is duly authorised by the Reserve Bank of India in this behalf. Details of foreign remittances for the receipt of services declared under purpose codes, namely, S0017, S0205, S0207, S0211, S0213, S0402, S0403, S0404, S0502, S0602, S0603, S0604, S0701, S0702, S0703, S0801, S0802, S0803, S0804, S0901, S1002, S1003, S1005, S1006, S1007, S1008, S1009, S1101 for such entities whose value of remittances aggregates to more than fifty lakh rupees in a financial year to which the return pertains. AIRA-I
2 An officer of a State Electricity Board or an electricity distribution  or transmission licensee under the Electricity Act 2003, or any other entity entrusted with such functions by the Central Government or State Government, who is duly authorised by such State Electricity Board or an electricity distribution  or transmission licensee or other entity, as the case may be.  Electricity consumed by such manufacturers, using an induction furnace or rolling mill to manufacture goods falling under Section XV of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) whose aggregate value of clearances exceeds  one hundred and fifty lakh rupees in the financial year to which the return pertains, as identified and intimated to him by the  Principal Chief Commissioner or the Chief Commissioner of Central Excise and Service Tax in-charge of the Central Excise or Service Tax Zone, by the 30thJune of the subsequent financial year. AIRA-II

4.   Time for furnishing information return.- The information return referred to in rule 3 shall be-

(a) filed on or before the 31stof December of the financial year following the financial year to which the return pertains:

Provided that the Board, may, by way of an order, extend the date for filing such return for reasons to be recorded in writing in such order;

(b) filed electronically, in Form AIRF, along with the Annexure of this Form, to the Directorate General of Systems and Data Management:

Provided that the Board, may by way of an order, designate an officer in the office of the Directorate General of Systems and Data Management, or any other officer or agency to receive the returns and may appoint an officer designated as  the  Annual Information Return-Administrator, not below the rank of the Commissioner of Central Excise and Service Tax, for the purposes of day to day administration of furnishing of the said information return including specification of the procedures, data structure, formats  and standards for ensuring secure capture and transmission of data, evolving and implementing appropriate security, archival and retrieval policies:

Provided further that till such time as the Board designates such an officer or agency for receiving the said information returns in the electronic format, or till such time the Annual Information Return-Administrator finalises the formats and standards for secure capture and transmission of data, the said returns may be filed in a computer readable media being a Compact Disc-Read Only Memory (CD-ROM) or a Digital Video Disc (DVD);

Notification No. 4/2016 [CE (NT)] 12-2-2016


Notification under Section 11C of the Central Excise Act on Di-Calcium Phosphate (animal feed grade) of rock phosphate origin falling under heading 2835 – 4/2016 – Dated 12-2-2016 – Central Excise – Non Tariff

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION NO 04/2016- CX (N.T),

New Delhi, Dated: February 12, 2016

G.S.R. 162 (E) - Whereas the Central Government is satisfied that according to a practice that was generally prevalent regarding levy of duty of excise (including non-levy thereof) under section 3 of the Central Excise Act, 1944 (1 of 1944), (hereinafter referred to as the said Act), on Di-Calcium Phosphate (animal feed grade) of rock phosphate origin falling under heading 2835 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)(hereinafter referred to as the said goods), was not being levied according to the said practice, during the period commencing on the 1st day of February, 2008 and ending with the 1st day of February, 2014;

2. Now, therefore, in exercise of the powers conferred by section 11C of the said Act, the Central Government hereby direct that the whole of the duty of excise payable under section 3 of the said Act on the said goods but for the said practice, shall not be required to be paid in respect of the said goods on which the said duty of excise was not levied during the period aforesaid in accordance with the said practice.

[F.N0.104/2/2013-CX.3]

(Shankar Prasad Sarma)

Under Secretary to the Government of India

Notification No. : S.O. 526(E) Dated: 12-2-2016


Notifies additional ares to a sector specific Special Economic Zone for Information Technology and Information Technology Enabled Services at District Thane, Maharashtra – S.O. 526(E) – Dated 12-2-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 12th February, 2016

S. O. 526(E).- WHEREAS, M/s. Serene Properties Private Limited, a private organization in the State of Maharashtra, had proposed under Section 3 of the Special Economic Zones Act, 2005 (28 of 2005), (hereinafter referred to as the said Act), to set up a sector specific Special Economic Zone for Information Technology and Information Technology Enabled Services at Kalwa Trans Thane Creek Industrial Area, MIDC, District Thane, in the State of Maharashtra;

AND, WHEREAS, the Central Government, in exercise of the powers conferred by sub-section (1) of Section 4 of the said Act read with rule 8 of the Special Economic Zones Rules 2006, had notified an area of 19.34 hectares at Kalwa Trans Thane Creek Industrial Area, MIDC, District Thane, in the State of Maharashtra as Special Economic Zone vide Ministry of Commerce and Industry Notification Number S.O. 1876 (E) dated 2nd November, 2007;

AND WHEREAS, M/s. Serene Properties Private Limited, has now proposed to include an area of 0.62 hectares as a part of above Special Economic Zone;

NOW, THEREFORE, in exercise of the powers conferred by second proviso to sub-section (1) of Section 4 of theSpecial Economic Zones Act, 2005 and in pursuance of rule 8 of the Special Economic Zones Rules, 2006, the Central Government hereby notifies an additional area of 0.62 hectares, as a part of above Special Economic Zone, thereby making total area of the Special Economic Zone as 19.96 hectares, comprising the plot number and the area given below in the table namely:-

TABLE

S.No.

Plot No.

Area in hectares

1

3 (P)

0.62

Total

0.62

Grant total area of SEZ after above addition

19.96

[F. No.  F.2/94/2005-SEZ] 

 DR. GURUPRASAD MOHAPATRA, Jt. Secy.

52 – 11-2-2016


Regulatory Relaxations for Startups- Clarifications relating to Issue of Shares – Circular – Dated 11-2-2016 – FEMA

RBI/2015-16/319
A.P. (DIR Series) Circular No. 52

February 11, 2016

To,

All Authorised Dealer Category – I Banks

Madam/Sir,

Regulatory Relaxations for Startups- Clarifications relating to Issue of Shares

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time.

2. Pursuant to paragraph 14 of the Sixth Bi-Monthly Monetary Policy Statement for 2015-16, Reserve Bank of India vide Press Release dated February 2, 2016, had announced that in case of startups, certain permissible transactions under the existing regulatory framework shall be clarified. One of the issues related to issue of shares without cash payment by the investor through sweat equity or against any legitimate payment owed by the company remittance of which does not require any permission under FEMA, 1999.

3. Accordingly, the following is clarified:

a. Issue of shares without cash payment through sweat equity: Reserve Bank of India vide Notification No. FEMA.344/2015 RB dated June 11, 2015 has permitted Indian companies to issue sweat equity, subject to conditions, inter-alia, that the scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 in respect of listed companies or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect of other companies.

b. Issue of shares against legitimate payment owed: Reserve Bank of India vide Notification No. FEMA.315/2014-RB dated July 10, 2014, has permitted Indian companies to issue equity shares against any other funds payable by the investee company (e.g. payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments, consultancy fees, etc.), remittance of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA, 1999 subject to conditions relating to adherence to FDI policy including sectoral caps, pricing guidelines, etc. and applicable tax laws (cf. paragraph 3 of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2015).

4. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents and customers concerned and advise them to refer to the above notifications for further details.

5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(B. P. Kanungo)
Principal Chief General Manager

51 – 11-2-2016


Regulatory relaxations for start-ups- Clarifications relating to acceptance of payments – Circular – Dated 11-2-2016 – FEMA

RBI/2015-16/318
A.P. (DIR Series) Circular No. 51

February 11, 2016

To,

All Authorised Dealer Category – I Banks

Madam/Sir,

Regulatory relaxations for start-ups- Clarifications relating to acceptance of payments

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000, notified by the Reserve Bank videNotification No. FEMA. 10 (R) /2015-RB dated January 21, 2016, as amended from time to time.

2. Pursuant to paragraph 14 of the Sixth Bi-Monthly Monetary Policy Statement for 2015-16, Reserve Bank of India vide Press Release dated February 2, 2016, had announced that in case of start-ups, to facilitate ease of doing business, certain permissible transactions under the existing regime shall be clarified. One of the issues relate to the start-ups accepting payment on behalf of overseas subsidiaries.

3. In this connection, it is clarified as under:

  1. A start-up in India with an overseas subsidiary is permitted to open foreign currency account abroad to pool the foreign exchange earnings out of the exports/sales made by the concerned start-up;
  2. The overseas subsidiary of the start-up is also permitted to pool its receivables arising from the transactions with the residents in India as well as the transactions with the non-residents abroad into the said foreign currency account opened abroad in the name of the start-up;
  3. The balances in the said foreign currency account as due to the Indian start-up should be repatriated to India within a period as applicable to realisation of export proceeds (currently nine months);
  4. A start-up is also permitted to avail of the facility for realising the receivables of its overseas subsidiary or making the above repatriation through Online Payment Gateway Service Providers (OPGSPs) for value not exceeding USD 10,000 (US Dollar ten thousand) or up to such limit as may be permitted by the Reserve Bank of India from time to time under this facility; and
  5. To facilitate the above arrangement, an appropriate contractual arrangement between the start-up, its overseas subsidiary and the customers concerned should be in place.

4. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents and customers concerned and advise them to refer to the above notifications for further details.

5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(B. P. Kanungo)
Principal Chief General Manager

Are original documents required to be filed for claiming refund? : 08-02-2016


Taxindiaonlinelogo-jpg          FEBRUARY 08, 2016

By S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate and R Vaidyanathan, M.Com., M Phil, Consultant

ONE of the very disturbing recent developments in terms of the claims filed by exporters of services, for claiming refund of unutilized cenvat credit of the service tax paid on input services, is the one involving submission of original documents. As a standard requirement, the Show Cause Notices issued to services exporters require originals of FIRCs, export invoices and input invoices to be submitted. When we enquired with the concerned Asst/Deputy Commissioners in some cases, we were informed that the original documents would have to be filed for processing of refund claims, in terms of Notification No, 27/2012-CE(NT) dated 18-6-2012.

On a re-reading of this important Notification, we found that in Para 3, the requirement of filing of certified copies of bank realization certificates being filed, is clearly mentioned. When this was pointed out, the response of the Departmental officers was that, since there is no mention of certified copies of export invoices and input invoices being allowed to be filed in the said Notification, the services exporter would have to necessarily file the original invoices.

On further study, we came across a very useful Circular No. 112/06/2009-ST dated 12-3-2009, in which, in Sl.No. VI, the following query has been clarified:

Query:

Authorities granting refund are insisting on original documents such as invoice, BL. SB, BRC, etc. Such documents are required under the law to be kept in the Head Office for audit. Refunds are denied on this ground.

Clarification issued by the Board :

Normally certified copy of the documents should be accepted. Only in case of in-depth enquiry original documents can be verified.

Even this circular does not seem to be of much help, as the Departmental officers handling refunds are of the firm view that, the said circular, having been issued in the context of Notification No. 41/2007-ST dated 6-10-2007 cannot be treated as clarifying issues arising of Notification No. 27/2012-CE(NT). Only a fresh clarification from the Board can help exporters, who are suffering from the unreasonable demands of the Department.

Be that as it may…… in recent show cause notices issued to services exporters, we have found allegations that the refund claimants have not demonstrated any use or correlation or nexus of the input services vis-à-vis the output services. In our view, in the case of services which are intangible by their very nature, it would be impossible for the exporter to demonstrate the nexus, except to request the concerned Asst/Deputy Commissioner to relocate himself/herself to the exporter’s premises.

Yet another recent requirement of the show cause notice demands the exporter to prove that the export transaction fulfils the requirements of Rule 6A(1)(f) of the Service Tax Rules, 1994. In some cases, the Department insists on submission of the copies of incorporation certificates of, the exporter’s overseas clients. As is known, Rule 6A(1)(f) of the said Rules states that the provision of any service shall be treated as export of service when the provider of service and recipient of service are not merely establishments of a distinct person in accordance with Explanation 3 to Section 65B(44) of the Finance Act, 1994. As per clause (b) of the said explanation, an establishment of a person in the taxable territory and any of this other establishment in a non-taxable territory shall be treated as establishments of different persons.

We feel that most of the Departmental officers adjudicating refund claims are not able to understand the language used in Rule 6A of the Service Tax Rules, 1994 read with Explanation 3(b) of Section 65B(44) of the Finance Act, 1994, in terms of which, the transaction involving rendering of service to one’s own overseas branch (which is not a separate establishment) would not be treated as export of service. The facts related to the exporters’ overseas customers can easily be ascertained on the basis of copies of invoices, service agreements and FIRCs and, therefore, to insist on copies of incorporation certificates of the overseas clients, would be totally unwarranted, in our view.

Finally…..… the show cause notices also require the exporter to file declarations from the land owners that the service tax collected (from the exporters) have been duly paid to the Department, within the due dates. This requirement is in the context of considering the refund of the service tax paid by the exporter, on renting services. In many cases, we have found that the landlords/Developers would have utilized cenvat credit for discharge of their service tax liability and in these cases, getting declarations from the landlords/Developers becomes very difficult. The decisions from even the Apex Court that the recipient of service cannot be denied credit on account of non-payment of the service tax by the service provider, obviously, fails to cut ice with our super Babus in the Department.

Before concluding…….

We operate out of Bangalore, India’s IT capital, from where, a significant portion of India’s services exports happen. We have found that, the show cause notices issued by different Asst/Deputy Commissioners vary widely & thus exhibit a lack of a fundamental approach to the refund granting process. Repeated notifications and circulars issued by the Board have not resulted in any improvement at the ground level. We find that, even in cases involving remand of the claims by the Appellate Authority, services exporters are not spared the agony of harassment by the lower officials.

Since it takes years for appeals to be heard by the Appellate Commissioners, it is not uncommon to come across cases where the original files are said to be misplaced, forcing the hapless exporter to start it, all over, again.

It is not known what the department seeks to achieve by this recalcitrant obstructionist attitude, except of course, derive a sadistic pleasure!

Nonetheless, we are optimistic that things may change for the better in the days to come.

Ahead of Budget 2016, PM Narendra Modi to review implementation status of Cabinet decisions : 10-02-2016


Prime Minister Narendra Modi will review next week the implementation status of some key decisions taken by the Union Cabinet, including those taken way back in July 2014.

Scheduled for February 17, this will be the second such review meeting that Modi will undertake with the Council of Ministers in just about three weeks.

The 27 decisions of the Cabinet and the Cabinet Committee on Economic Affairs whose implementation status would be reviewed include the amendments to the Factories Act and the Apprentices Act, which were cleared over one and a half years ago in July 2014, sources told PTI.

PM Narendra Modi had chaired a similar meeting of the Council of Ministers on January 27 as well.

Other decisions slated for implementation status review are setting up of a Credit Guarantee Fund for providing guarantees to loans extended under the Pradhan Mantri Mudra Yojana, operationalisation of Budget announcement of 2015-16 on the Atal Pension Yojana, the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Pradhan Mantri Suraksha Bima Yojana.

The Prime Minister will also check progress in the Pradhan Mantri Jan Dhan Yojana, the Swacch Bharat Mission for urban areas, the Housing for All by 2022 mission, the National Skill Development Mission, the National Health Mission and the Deendayal Upadhyaya Gram Jyoti Yojana.

Other such decisions relate to the National Ayush Mission, amendment to the Juvenile Justice (Care and Protection of Children) Bill, 2014, setting up three new All India Institute of Medical Sciences (AIIMS) at Mangalagiri, Nagpur and Kalyani and strengthening of the drug regulatory system.

The decisions relating to setting up of six new IITs and IIMs, amendment to the Payment of Bonus Act, 1965, and the nationwide celebration of 125th birth anniversary of B R Ambedkar will also figure in the status review.

Source : PTI

Narendra Modi govt approaches banks for funding Swachh Bharat Mission : 10-02-2016


The Narendra Modi government is now looking at the private sector to aide its Swachh Bharat Mission and provide financial assistance for building toilets for poor families, union Rural Development Minister Birender Singh said on Tuesday.

He asked commercial banks and micro-financing institutes to come forward for credit disbursal to these families for construction of toilets.

“The finance ministry has included water and sanitation into the new list of priority sectors for lending by commercial banks. There is an incentive of Rs 12,000 for toilet construction for BPL (below poverty line) families, but to achieve universal coverage, there is a dire need for easy financing by commercial banks and other financial institutions,” the minister said at conference ‘Innovative Financing for Clean India’.

He noted the NDA government is committed to bring a monumental reform in country’s sanitation.

“More than 14.7 million toilets were constructed in the rural areas under Prime Minister Narendra Modi’s pet project Swachh Bharat Mission, but still close to 50 percent of our rural population still does not have access to a toilet,” he added.

He said his ministry’s policies provide lot of scope for small and medium private sector institutions to engage in waste management and improvisation of village environmental management infrastructure.

“Private sector needs to come forward in a big way for credit disbursal to achieve the goal of making India, an open defecation free country by 2019,” the minister said asserting sanitation is closely linked with poor health, low education status, malnutrition and poverty.

Rural Development Secretary J. K. Mohapatra stressed the need for creating strong synergy between self-help groups (SHGs) and Swachh Bharat Mission across the country.

Urging the banks and micro-finance institutions to extend credit for sanitation and water sectors, he also said that the poor are not only credit-worthy and enterprising, but they are extremely responsible borrowers also.

He also expressed satisfaction that the self-help group movement is gaining momentum in Indo-Gangetic belt and in central India after its success in south India.

 Source : The Business Standard

Move to keep power out of GST to inflate bill by 6-18% : 09-02-2016


The government’s decision to keep electricity out of the ambit of the proposed goods and services tax (GST) would inflate the cost of power to consumers between 6-18% with the worst hit to be solar and wind power companies, experts and sources from the industry said.

The government’s decision to keep electricity out of the ambit of the proposed goods and services tax (GST) would inflate the cost of power to consumers between 6-18% with the worst hit to be solar and wind power companies, experts and sources from the industry said. This is because these companies would have to pay GST for their inputs such as fuel and machinery but won’t be able to get these taxes refunded given that their output — electricity— is exempt.

Companies have therefore demanded that electricity be taxed in the GST regime, in what seems a curious irony. Alternatively, they suggested “zero-rating” of their output with the facility of refund of input taxes as in the case of exported goods.

Power generated in the country is now subject to electricity duties levied by the state governments at different rates. These duties are paid by the consumers, while captive power for self-consumption is exempt in some cases. The electricity duty is likely to remain in the GST regime. Currently, inputs for electricity generation are subject to excise/VAT levies (at concessional rates in some cases) but corporate groups are largely able to offset the input tax costs against tax liabilities on outputs other than power and indeed in case of captive power, an input by definition.

The tax incidence on thermal power could increase from around 12% now to about 18-20% under the GST, experts said. The burden would be higher for renewable firms as bulk of capital costs – investments in equipment- form bulk of their operational expenses, with labour being a tiny factor. “The increase in cost of electricity (in the GST regime) could be maximum for the renewable sources such as the solar and wind. Solar panels, wind turbines, towers, and all other inputs would attract GST at the rate of 18%, with no benefit of input tax credit. This would directly translate into a cost increase of 18%. In the case of gas and coal-based generation too, a similar scenario would prevail,” said Satya Poddar, senior tax advisor at EY.

If electricity were to be brought within the ambit of GST, as it is in virtually all international jurisdictions with modern GST, there would be no blockage of input taxes and any GST charged on electricity output would also be fully creditable to industrial and commercials users, effectively resulting in zero-tax on business-to-business supplies of electricity, experts said.

“In the GST regime, power companies would be at a disadvantage because electricity generated us not part of the proposed regime. This would increase the cost of electricity production, as the inputs and consumables costs are tend to go up by about six to 8%. And this can create an inflationary tendency in the economy since electricity is widely used in all supplies of goods and services. The solution could be to bring electricity under GST regime and make it zero rated, so that power companies could claim input tax refunds,” said Sachin Menon, national head of indirect tax at KPMG in India.

According to Hemal Zobalia, partner at Deloitte Haskins & Sells LLP, the problem of credit of input taxes being not entirely available is even now there with the power industry. He, however, said the problem could aggravate in the GST as the comprehensive system could bring more inputs under tax and the rates could increase.

Currently, India has 250 GW of installed generation capacity. Of this, nearly 130 giga watts is produced by thermal plants using coal or natural gas. The balance are from solar, wind, hydro and nuclear sources. Although natural gas is kept out of GST, there could be taxation by states that would end up as a cost to the power producers.

In and Out 

Electricity could cost  6-18% more after GST roll-out due to non-availability  of input tax credit to firms. Steeper cost increases in case of renewable energy firms given they spend chiefly on equipment. Industry demands inclusion of electricity in the GST ambit to offset the taxes paid on inputs.

Source : The Economic Times

F.No.276/114/2015-CX.8A – 9-2-2016


MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF EXCISE AND CUSTOMS
(LEGAL CELL)
NEW DELHI

Dated: February 9, 2016

INSTRUCTION

To,

1. All Principal Chief Commissioners/Chief Commissioners of Customs, Central Excise and Service Tax;

2. All Director Generals of Customs, Central Excise and Service Tax;

3. <webmaster.cbec@icegate.gov.in>

Sub:- Effect of ‘in limine’ dismissal of Special Leave Petition (SLP) by the Supreme Court and Filing of Review Petition in Supreme Court- regarding;

Board has been receiving various references from the field formations in respect of the effect of ‘in limine’ dismissal of Special Leave Petition (SLP) i.e. without its grant or without admission or any discussion by the Supreme Court. There is doubt relating to whether on dismissal of SLP ‘in limine’ the question of law posed before the Supreme Court remains open or the doctrine of merger is applicable. There are also doubts relating to filing of Review Petition before the Supreme Court. The issues have been examined by the Board.

2. The Apex Court in Kunhayammed v. State of Kerala 2001 (129) E.L.T. 11 (S.C) = 2002-TIOL-50-SC-LMT-LB has dwelt extensively upon the aspect as to when a decision of the Court in a SLP would be binding and when not. The Supreme Court observed that there are two distinct stages: (a) Granting of special leave to appeal; and (b) Hearing the appeal. If the SLP is dismissed at the stage of special leave without a speaking or reasoned order, there is no res judicata, no merger of the lower order and the petitioner retains the statutory right, if available of seeking relief in review jurisdiction of the High Court. If the SLP is dismissed at the first stage by speaking a reasoned order, there is still no merger but rule of judicial discipline and declaration of law under Article 141 of the Constitution will apply. The order of Supreme Court would mean that it has declared the law and in that light the case was considered not fit for grant of leave. Once leave is granted but SLP converted into appeal is dismissed with or without reasons, merger results and law is declared. It is no longer permissible to move the High Court by review and no Court, Tribunal or Authority can express any opinion contrary to the view taken by Supreme Court. Order appealed against can be reversed, modified or affirmed by the Supreme Court in exercise of appellate jurisdiction at the second stage only and not at the discretionary first stage of special leave under Article 136 of the Constitution of India.

3. Article 137 of the Constitution of India, which reads as under, provides for review of judgments or orders by the Supreme Court:

“Subject to the provisions of any law made by Parliament or any rules made under Article 145, the Supreme Court shall have power to review any judgment pronounced or order made by it.”

4. Part VIII, Order XL of the Supreme Court Rules, 1966 states that the Supreme Court may review its judgment in a civil proceeding on the ground mentioned in Order XLVII, Rule I of the Civil Procedure Code i.e. the discovery of new and important matter or evidence which, after the exercise of due diligence was not within the knowledge or could not be produced at the time when the decree was passed or order made, or on account of some mistake or error apparent on the face of the record or for any other sufficient reason. In a criminal proceeding review petition can only be filed when there is an error apparent on the face of the record. The application for review shall be filed within thirty days from the date of the judgment or order sought to be reviewed. The application shall set out clearly the grounds of review.

5. The Supreme Court in Kamlesh Verma vs. Mayawati & Ors. (Review Petition No. 453/2012 in Writ Petition (CRL.) 135/2008) vide order dated 08.08,2013 has laid down the following principles: “(A) when the Review will be maintainable:

(i) Discovery of new and important matter or evidence which, after the exercise of due diligence, was not within knowledge of the petitioner or could not be produced by him;

(ii) Mistake or error apparent on the face of the record;

(iii) Any other sufficient reason.

The words “any other sufficient reason” has been interpreted in Chajju Ram vs. Neki, AIR 1922 PC 112 and approved by the Supreme Court in Moran Mar Basselios Catholicos vs. Most Rev. Mar Poulose Athanasius & Ors. (1955) 1 SCR 520, to mean “a reason sufficient on grounds at least analogous to those specified in the rule.”

The same principles have been reiterated in UOI vs. Sandur Manganese & Iron Ores Ltd. & Ors., JT 2013 (8) SC 275.

“(B) When the review will not be maintainable:

(i) A repetition of old and overruled argument is not enough to re-open concluded adjudications;

(ii) Minor mistakes of inconsequential import;

(iii) Review proceedings cannot be equated with the original hearing of the case;

(iv) Review is not maintainable unless the material error, manifest on the face of the order, undermines its soundness or results in miscarriage of justice;

(v) A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected but lies only for patent error.

(vi) The mere possibility of two views on the subject cannot be a ground for review.

vii) The error apparent on the face of the record should not be an error which has to be fished out and searched.

(viii) The appreciation of evidence on record is fully within the domain of the appellate court, it cannot be permitted to be advanced in the review petition.

(ix) Review is not maintainable when the same relief sought at the time of arguing the main matter has been negatived”

6. The field formations are, therefore, requested to keep in mind the above, while interpreting the Supreme Court’s dismissal of SLP ‘in limine’. If the SLP has been dismissed ‘in limine’ there cannot be any ground for filing a review petition. It is requested that above instructions may be brought to the knowledge of all formations within your jurisdiction.

F.No.276/114/2015-CX.8A

(Harsh Vardhan)
Senior Analyst

FM’s fiscal deficit math turns more difficult : 09-02-2016


The Central Statistics Office on Monday released the advanced estimates for 2015-16. It forecast real gross domestic product (GDP) growth for the year at 7.6 per cent and nominal GDP growth at 8.6 per cent. The lower-than-expected GDP growth could make it more challenging for Finance Minister Arun Jaitley to meet hisfiscal deficit target for the year.

According to 2015-16 budgeted estimates, the nominal GDP for the year was pegged at Rs 141 lakh crore and the fiscal deficit was estimated to be Rs 5.56 lakh crore. Last week, the government came out with advanced estimates for 2014-15 and pegged last financial year’s nominal GDP at Rs 124.88 lakh crore. According to data released on Monday, nominal GDP for the year was now expected to be Rs 135.67 lakh crore.

Jaitley and other senior finance ministry officials have said time and again that this year’s fiscal deficit target of 3.9 per cent of GDP would be met. That comes up to Rs 5.29 lakh crore. The budgeted deficit target of Rs 5.56 lakh crore was in fact 4.1 per cent of the nominal GDP advanced estimates.

On the revenue front, the finance ministry was expecting higher proceeds from non-tax revenue, especially through record dividends from state-owned companies and financial institutions and the Reserve Bank of India.

The government has also imposed additional revenue generating measures such as duties on diesel and petrol. That, coupled with an increase in service tax, was expected to lead to indirect tax figures being revised to higher than the budgeted amount by as much as 20 per cent.

On the other hand, the government’s disinvestment programme had come a cropper this year due to volatile market conditions. The Centre had asked state-owned companies to buy back shares from it to make up for any shortfall. Additionally, Revenue SecretaryHasmukh Adhia said the direct tax shortfall this year could be as high as Rs 40,000 crore.

On the expenditure side, the government had boosted allocations in programmes such as the Mahatma Gandhi National Rural Employment Gurantee Scheme (MGNREGS) to combat two consecutive years of poor rainfall. In spite of low oil prices, the revised estimates on major subsidy heads could be higher than the budgeted estimates.

For 2016-17, provided the nominal GDP growth was similar to projections for this year, the nominal GDP could be Rs 147.33 lakh crore.

There is a debate in the government whether Jaitley should stick to the Fiscal Responsibility and Budget Management-mandated fiscal target of 3.5 per cent of GDP or re-assess it in the face of additional spending burden due to the recommendations of the Seventh Pay Commission; the one rank, one pension payout; pension; rural sector push and higher capital spending.

If the minister maintained the fiscal deficit target of 3.5 per cent, in absolute terms, it could come up to about Rs 5.16 lakh crore.

Source : Business Standard

Arun Jaitley asks states to step up infra, social sector spending : 08-02-2016


Finance Minister Arun Jaitley today said he expects states to increase spending on infrastructure and poverty alleviation schemes as the 14th Finance Commission has devolved higher funds to them.

Finance Minister Arun Jaitley today said he expects states to increase spending on infrastructure and poverty alleviation schemes as the 14th Finance Commission has devolved higher funds to them.

“We expect that those states whose resources have been increased after the implementation of the 14th Finance Commission will spend further on infrastructure creation and anti-poverty programmes since their income have increased considerably,” Jaitley told reporters here.

Several states, in their pre-budget meeting with Jaitley, sought higher allocation in the upcoming budget for implementing Pay Commission recommendations as well as under centrally-sponsored schemes.

“The states have discussed their own resources and each one of them is competing for higher resources, higher investment and they are all geared up to fight this environment of global slowdown so that India remains an economy which is on the move,” he said.

The 14th Finance Commission had last year recommended a record 10 per cent increase in the states’ share in the Union taxes to 42 per cent, which has been accepted by the Centre.

The 7th Pay Commission in November recommended increase in remuneration of about one crore government employees and pensioners which is estimated to impose an additional burden of Rs 1.02 lakh crore in 2016-17. The new pay scales, subject to acceptance by government, will come into effect from January 1, 2016.

“As far as central government is concerned we would like to cooperate with every state, and as the growth of states increases, the national growth will also increase,” Jaitley said in his opening remarks.

He also said that one of challenging area is agriculture which suffered in last two years due to inadequate monsoon.

During the meeting, the states also demanded early release of the long pending compensation for phasing out of central sales tax (CST) and raising state’s borrowing limit as per the recommendation of 14th Finance Commission.

Source : PTI

Govt shouldn’t waste all energy on GST Bill : 08-02-2016


Modi must focus on other state-level reforms, such as those in labour laws, leasing of land and agricultur

Political troubles for the proposed goods and services tax (GST) legislation do not seem to be ending. It is clear that the overtures made by the National Democratic Alliance government in November during the winter session of Parliament failed to persuade the Congress to reach an understanding on passing the Constitution amendment Bill on GST. As is evident after last week’s meeting to decide the schedule of the forthcoming Budget session of Parliament, the Congress and other Opposition political parties are keen on cornering the government – particularly in the Rajya Sabha, where it is vulnerable because of its lack of majority – on issues such as the President’s rule in Arunachal Pradesh and the death of a Dalit student in Hyderabad Central University. This has clouded the prospects of a smooth passage of the Constitution amendment Bill on GST in the Budget session, a critical requirement if the transformative tax reform is to take effect during the next financial year.

What has made matters worse is Prime Minister Narendra Modi’s recent charge that only one family was responsible for disrupting Parliament. In an election meeting in Assam last Friday, the prime minister said: “One family is so rigid that they do not allow the Rajya Sabha to function.” Even though Mr Modi did not name the Gandhi family, Congress Vice-President Rahul Gandhi has hit back saying that the prime minister should stop making excuses and instead run the government. Prospects of legislative work including the passage of the GST Bill have thus turned poorer in light of the rising political temperature. If the Congress is guilty of playing disruptive politics and stalling legislative reform, the government should also take the blame for not having made a sincere effort in reaching out to the Opposition after recognising its lack of a majority in Rajya Sabha. Instead, the government’s leaders have provoked the Opposition just ahead of the Budget session.

Apart from political troubles, the GST Bill is also a victim of a failure on the part of the government and the Opposition parties to narrow their differences on its broad structure. The government has rightly suggested that fixing a cap on the tax rate in the main law would be inadvisable and the Congress should see reason in that argument. Similarly, the government should show its willingness to address the Congress’ concerns on a needless one per cent tax on inter-state transfer of goods, which will help only producing states and undermine the spirit of the GST regime, and also on the formation of a dispute settlement authority with states having a reasonable say in its decision-making powers. Unfortunately, not much progress has taken place in settling these three crucial differences.

Given the fractious nature of politics affecting legislative work in Parliament and the unresolved differences over key elements in the GST Bill, it is perhaps time the government recalibrated its timelines for rolling out the new tax regime across the country. Its road map should be defined by its recognition of what is politically feasible. There are a host of other reforms that the Union government can get implemented in states where it has a friendly and cooperative government. Instead of spending all its political energy on the GST Bill, which has hit a major roadblock, the Union government should not lose sight of many other state-level reforms like those in labour laws, leasing of land and agriculture.

Source : Business Standard

Notification No. : F. No. 1/13/2013 CL-V-part-II Dated: 22-1-2016


Companies (Incorporation) Amendment Rules, 2016 – F. No. 1/13/2013 CL-V-part-II – Dated 22-1-2016 – Companies Law

GOVERNMENT OF INDIA

MINISTRY OF CORPORATE AFFAIRS

Notification

New Delhi, the 22nd January, 2016

G.S.R.  (E).-In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Incorporation) Rules, 2014, namely:-

1. Short title and commencement.-

(1) These rules may be called the Companies (Incorporation) Amendment Rules, 2016.

(2) They shall come into force from 26th day of January, 2016.

2. In the Companies (Incorporation) Rules, 2014 (herein after referred to as the principal rules), in rule 8,-

(i) in sub-rule (2)

(a) sub-clause (ii) of clause (b) shall be omitted;

(b) sub-clause (x) of clause (b) shall be omitted; and

(c) sub-clause (xvii) of clause (b) shall be omitted.

(ii) sub-rule (3) shall be omitted.

(iii) sub-rule (4) shall be omitted.

3. In the principal rules, for Rule 9 the following shall be substituted namely:

“9. Reservation of name – An application for the reservation of a name shall be made in Form No. INC.1  along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 which may be approved or rejected, as the case may be, by the Registrar, Central Registration Centre.”

(4) In the principal rules, in rule 36, in sub-rule(12),-

(i) after sub-clause (b), the following shall be inserted.-

‘(ba) After the resubmission of the documents and on completion of second opportunity, if the registrar still finds that the documents are defective or incomplete, he shall give third opportunity  to remove such defects or deficiencies;’

Provided that the total period for re-submission of documents shall not exceed a total period of thirty days.

(ii) in sub-clause (c), for the words ‘two opportunities’, the words ‘three opportunities’ shall be substituted.

(5) In the principal rules, for the existing Form No.INC- 1, the following form no. INC-1 shall be substituted, namely:-

No. 1015/3/2016-CX Dated: 3-2-2016


Refund of Excise duty on purchase of cars by physically handicapped persons – Dated 3-2-2016 – Central Excise

Circular No. 1015/3/2016-CX

F.No.268/8/2015-CX-8

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Customs

New Delhi, 3rd February, 2016

To

Principal Chief Commissioner/Chief Commissioner of Central Excise, Customs and Service Tax (All)

Principal Commissioner of Central Excise, Customs and Service Tax (holding charge of Chief Commissioner) (All)

Web Master, CBEC

Madam/Sir

Subject: – Refund of Excise duty on purchase of cars by physically handicapped persons- reg.

Attention is invited to Sl. No 280 of Notification No. 12/2012-CE dated 17.03.2012 vide which concessional rate of duty has been provided for purchase of Cars by physically handicapped persons.

2.  References have been received in the Board from intended beneficiaries that there have been instances where refund applications filed beyond one year from purchase of vehicle, have been rejected as they were hit by limitation under Section 11B of the Central Excise Act, 1944. Reason for such delay has been claimed in some cases as delay in procuring certificate from the line Ministry as prescribed in the notification, confirming the said goods are capable of being used by the physically handicapped persons.

3.  In this regard, to ameliorate such situations it is directed that when a handicapped person approaches the Central Excise office for refund of duty paid on the vehicle, he should be advised that refund application should be filed within one year of payment of duty, irrespective of availability of certificate from the Line Ministry so that such claims are not time barred. The Officer processing the refund in turn should issue a deficiency memo, if the said certificate is not available. On submission of the Certificate, refund can be processed and sanctioned. Interest would be payable only for period beyond three months from submission of the complete application with the certificate from the Line Ministry.

4.  Wide publicity may be given to this Circular. Difficulty, if any, in implementing the circular should be brought to the notice of the Board. Hindi version would follow.

Shankar Prasad Sarma

Under Secretary (CX.8

No. 1014/2/2016-CX Dated: 1-2-2016


Inclusion of show cause notice’s issued in relation to levy of CVD on vessels imported for breaking in the “Call-Book” – Dated 1-2-2016 – Central Excise

Circular No.-1014/2/2016-CX

F. No. 6/14/2014-CX.I (Pt.)

Government of India

Ministry of Finance

Department of Revenue

Central Board of Excise & Custom

New Delhi, dated the 1st  February, 2016

To

Principal   Chief   Commissioner/   Chief   Commissioner   /   Principal   Commissioner   of

Central Excise and Customs (All)

Web-master, CBEC

Madam/Sir,

Subject: Inclusion of show cause notice’s issued in relation to levy of   CVD on vessels imported for breaking in the “Call-Book”-reg.

References have been received in the Board from trade and field formations in relation to Judgement of Hon’ble High Court of Gujarat passed in SCA No. 10607 of 1995 filed by M/s Shivam Engineering Company and othersreported as [2014-TIOL-1563- HC-AHM-CUS]. A SLP has been filed by the department in Hon’ble Supreme Court against this order.

2.  In the said judgement, Hon’ble High Court has held that duty under Central Excise Act, 1944 can be levied, if the article has come into existence as a result of production or manufacture. Articles which are not produced or manufactured cannot be subjected to levy of excise duty. On the import of like article, no additional duty can be levied under   section   3(1)   of   the   Customs   Tariff  Act,   1975.   Since   the   vessels   and   other floating structures for ‘breaking-up’ are not manufactured in India, no excise duty is leviable and consequently no additional duty under Section 3(1) of the Customs Tariff Act, 1985 can be levied on import of such goods. The reason for such conclusion by Hon’ble  High Court  is  that when articles  which are not  produced  or manufactured cannot   be   subjected   to   levy   of   excise   duty,   then   on   the   import   of   like   articles   no additional duty can be levied under the Customs Tariff Act.

3. In view of above said judgement, trade are following two different practices   as enumerated below and are being issued Show cause Notices according to the practice they follow:-.

(i)   Show   Cause   Notices   have   been   issued   to   importers   who   are   not   paying   CVD demanding   CVD   from   them   as   department   has   appealed   against   the   order   of   the Hon’ble High Court of Gujarat.

(ii) Show Cause Notices for wrong availment of CENVAT credit have been issued to those   importers   who   are   paying   CVD   voluntarily   and   taking   CENVAT   credit   and utilising the same for payment of Central Excise duty liability arising due to breaking of vessels.

4.    The   problem   faced   by   the   trade   due   to   issue   of   Show   Cause   Notices   in   either situation has been examined in Board and it has been decided that all Show Cause Notices issued for non-payment of CVD [refer para3(i) above] shall be kept in call book till the SLP filed by the department in the Hon’ble Supreme Court is decided.

5.   Show   Cause   Notice   denying   Cenvat   Credit   of   CVD   paid   voluntarily   by   the importers at the time of import is not warranted . It is well settled position in law that a buyer may avail Cenvat Credit, if supplier has paid duty. In this regard following case law may be referred- CCE vs. CEGAT2006 (202) ELT 753(Mad HC DB), CCE vs Ranbaxy  Labs  Ltd.  [2006(203)  ELT  213(P&H  HC  DB)],  Commissioner  of Central Excise,   Chennai-I   vs   CEGAT,   Chennai   reported   as   [2006(202)ELT.753(MAD.)]. Credit is accordingly admissible for duty paid voluntarily.

6.   Thus, once the importer has paid CVD on import of ship, Cenvat Credit of that CVD cannot be denied for payment of Central Excise duty on breaking of that ship. Show Cause Notices already issued for denying Cenvat Credit may be decided in light of these instructions and in future such Show Cause Notices may not be issued. 7. Also vide Notification No. 1/2016- Central Excise(N.T.), dated 01.02.2016 in the CENVAT Credit Rules, 2004, in rule 3, in sub-rule (1), in clause (vii), the proviso has been omitted.

8.     Proviso   to   rule   3(1)(vii)   of   CENVAT   Credit   Rules,   2004   was   inserted   vide Notification No. 3/2011-Central Excise(NT), dated 1.3.2011. In the breaking of ships, products of section XV(base metals and articles of base metal) are obtained which are deemed to be manufactured as provided in section note 9 of Section XV of the First Schedule to the Central Excise Tariff Act, 1985.On the other hand, a number of used serviceable   articles   such   as   pumps,   air   conditioners,   furniture,   kitchen   equipment, wooden panels etc. are also generated. These are generally sold as second hand goods by ship breaking units but no excise duty is payable as they do not emerge from a manufacturing process. At the same time, ship breaking units are allowed to avail full credit of additional duty of customs paid on the ship when it is imported for breaking. This  anomaly   was  resulting  in  excess  utilization  of CENVAT  credit.  Rule  3  of  the CENVAT Credit Rules, 2004 was accordingly amended to prescribe that Cenvat credit shall not be allowed in excess of 85% of the additional duty of customs paid on ships, boats etc. imported for breaking.

9.  Further, amendment in Rule 6 of CENVAT Credit Rules, 2004 was carried out in budget of 2015, to provide that now credit is required to be reversed even for non- excisable goods produced as byproducts in the process of manufacture of excisable goods. This amendment has brought non-excisable goods and exempt goods at par and no credit is now available on either of them. The explanation inserted in Rule 6 is as follows:-

Explanation1-   For   the   purpose   of   this   rule,   exempted   goods   or   final   products   as defined in clause (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory.

10.    At   present   there   is   a   conflict   regarding   reversal   of   credit   in   relation   to   non-excisable     goods     which     emerge     during     breaking     of     ship     viz.     whether restriction/reversal   of   credit   needs   to   be   done   under   proviso   to   rule   3(i)(vii)   of CENVAT  Credit   Rules,   2004   or   under   rule   6   of   CENVAT  Credit   Rules,   2004.  To resolve the conflict, the provision restricting CENVAT credit to 85% under proviso to rule   3(i)(vii)   of   Cenvat   Credit   Rule,   2004   has   been   deleted.   Consequently   ship breaking units would be entitled to avail 100% credit of the CVD paid with effect from 01.03.2015 but would also be required to follow provisions of rule 6 of CENVAT Credit   Rules,   2004   with   effect   from   01.03.2015.   This   beneficial   amendment   of deleting   proviso   to   rule   3(i)(vii)   of   CENVAT   Credit   Rules,   2004   has   been   done retrospectively with effect from 01.03.2015, that is the date from which reversal of Cenvat Credit for non-excisable goods was provided in Rule 6 of Cenvat Credit Rules, 2004.

11.  Difficulties faced, if any, in implementation of this Circular may be brought to the notice of the Board. Hindi version follows.

Yours faithfully

(Santosh Kumar Mishra)

Under Secretary to the Government of India

Notification No. : 02/2016 Dated: 3-2-2016


Seeks to amend CENVAT Credit Rules, 2004, so as to i. specify that the Cenvat credit of any duty specified in sub-rule (1) shall not be utilized for payment of the Swachh Bharat Cess. ii. allow credit of service tax paid on sale of dutiable goods on commission basis. – 02/2016 – Dated 3-2-2016 – Central Excise – Non Tariff

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 02/2016-Central Excise (N.T.)

New Delhi, the 3rd February, 2016

G.S.R.—(E).- In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) andsection 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely : –

1.            (1) These rules may be called the CENVAT Credit (Second Amendment) Rules, 2016.

(2) They shall come into force on the date of their publication in the Official Gazette.

2.   In the CENVAT Credit Rules, 2004 (here-in-after referred to as the said rules), in rule 2, in clause (l), after sub-clause (C), the following Explanation shall be inserted, namely:-

“Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable goods on commission basis.”.

3.   In the said rules, in rule 3, in sub-rule (4),  after the sixth proviso, the following proviso shall be inserted, namely: –

“Provided also that the CENVAT credit of any duty specified in sub-rule (1) shall not be utilised for payment of the Swachh Bharat Cess leviable under sub-section (2) of section 119 of the Finance Act, 2015 (20 of 2015):”.

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)

Under Secretary to the Government of India

Note.- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 23/2004 – Central Excise (N.T.), dated the 10th  September, 2004 vide number G.S.R. 600(E), dated the 10th September, 2004 and last amended vide notification No. 01/2016 – Central Excise (N.T.), dated the 1st February, 2016, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 132(E), dated the 1st February, 2016.

 

Notification No. : 01/2016 Dated: 1-2-2016


Amendment in CENVAT Credit Rules, 2004 – the provision restricting CENVAT credit to 85 under proviso to rule 3(i)(vii) of Cenvat Credit Rule, 2004 deleted. – Consequently ship breaking units would be entitled to avail 100 credit of the CVD paid with effect from 01.03.2015 – 01/2016 – Dated 1-2-2016 – Central Excise – Non Tariff

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 01/2016 – Central Excise (N.T)

New Delhi, the 1st February, 2016

G.S.R.132 (E).-   In exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:-

1. Short title and commencement.- (1) These rules may be called the CENVAT Credit (First Amendment) Rules, 2016.

(2) They shall come into force with effect from the 1st day of March, 2015.

2. In the CENVAT Credit Rules, 2004, in rule 3, in sub-rule (1), in clause (vii), the proviso shall be omitted;

[F. No. 6/14/2014-CX.I (Pt.)]

(Santosh Kumar Mishra)

Under Secretary to the Government of India

Note - The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 600(E) dated the 10th September, 2004 {Notification No. 23/2004 Central Excise (N.T) dated the 10th September, 2004} and was last amended vide number G.S.R. 1028(E), dated the 31st December, 2015 {Notification No. 27/2015 -Central Excise (N.T.), dated the 31st December, 2015}.

Notification No. : F. No. K-11022/65/2015-Ad.ED Dated: 5-2-2016


Superseded notification number S.O.44(E), dated 8th January, 2008, – F. No. K-11022/65/2015-Ad.ED – Dated 5-2-2016 – Foreign Exchange Management

 

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION

New Delhi, the 5th February, 2016

S.O. 373(E).- In exercise of the powers conferred by sub-section (1) of Section 17 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in supersession of the notification published vide number S.O.44(E), dated 8th January, 2008, the Central Government hereby appoints the Special Directors (Appeals) specified in column (2) of the Table below to hear appeals against the orders of the Adjudicating Authorities under the said Act as per   jurisdiction specified in column (5) within the zone and sub-zone specified in columns (3) and (4) respectively, in addition to their existing duties with effect from the date of publication of this notification in the official Gazette, namely:-.

Commissioner of Income Tax nominated as Special Director (Appeals) for the FEMA cases and their jurisdiction.

S.No. Special Director (Appeals) Zone Sub-Zone Jurisdiction

(1)

(2)

(3)

(4)

(5)

1.

Commissioner of Income Tax (Appeals) , Delhi – 35 Delhi Chandigarh Jaipur Jallandhar Srinagar Dehradun Shimla States of Rajasthan, Uttrakhand, Haryana, Punjab, Himachal Pradesh, Jammu &  Kashmir, and Union Territory of Chandigarh and National Capital Territory of Delhi

2.

Commissioner of Income Tax(Appeals), Kolkata – 23 Kolkata Guwahati Lucknow Patna Bhubaneswar Allahabad Ranchi States of West Bengal, Assam, Meghalaya, Arunachal Pradesh, Sikkim, Nagaland, Manipur, Mizoram, Tripura, Odisha, Bihar,  Jharkhand,  Uttar Pradesh and Union Territory of Andman and Nicobar.

3.

Commissioner of Income Tax(Appeals), Mumbai – 6 Mumbai Ahmedabad Panaji Surat Nagpur Indore Raipur States of Maharashtra, Goa, Madhya Pradesh, Chhattisgarh, Gujarat, Union Territory of Dadra and Nagar Haveli and  Union Territory of Daman & Diu.

4.

Commissioner of Income Tax (Appeals) Chennai – 5 Chennai Kochi Bengaluru Hyderabad Madurai Kozhikode  States of Tamil Nadu, Kerala, Karnataka,  Andhra Pradesh  and Telangana, Union Territory  of Puducherry and Union Territory of Lakshadweep.

[ F. No. K-11022/65/2015-Ad.ED) 

 SANTOSH KUMAR,  Under Secy

GST will become a reality soon: Jaitley : 05-02-2016


Finance Minister Arun Jaitley on Thursday hoped the opposition parties will “see reason” and the Goods and Services Tax (GST) Bill, which is held up in Rajya Sabha, will become a reality soon.

“It (GST) has been supported by most political parties and I am sure others will also see reason and this law will become a reality very soon,” the minister said while inaugurating the two-day India Investment Summit in New Delhi on Thursday.

He said the government is also working on streamlining the direct taxation system. “We want to rationalise our direct tax system in order to make it one of the most competitive regimes in the world comparable with what competitive economies elsewhere have.”

He further said reform is a continuous process and “there is no finishing line” for it as “it has to go on and on because challenges keep coming up”.

GST, which will subsume all indirect taxes such as excise duty, service tax and sales tax into one uniform rate, is stalled in the Rajya Sabha as the Congress is pressing for three changes.

The Congress has stalled the passage of the constitutional amendment Bill, derailing the government’s plan to roll out GST from April 1.

The three demands are a cap on the GST rate in the Constitution itself, removal of the proposed one per cent additional tax on inter-state movement of goods and setting up a judicial panel to adjudicate disputes among states.

Budget session of Parliament commences on February 23.

While the first part of the session will end on March 16, the second part will take place from April 25 to May 13.

Source : Business Standard

No. 41 Dated: 4-2-2016


Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/305

A.P. (DIR Series) Circular No. 41

February 04, 2016

To

All Category – l Authorised Dealer Banks

Madam / Sir,

Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 25 dated November 05, 2015 wherein the Rupee value of the Special Currency Basket was indicated as ₹ 78.1657270 effective from October 28, 2015.

2. AD Category-I banks are advised that a further revision has taken place on January 20, 2016 and accordingly, the Rupee value of the Special Currency Basket has been fixed at ₹ 80.9604520 with effect from January 25, 2016.

3. AD Category-I banks may bring the contents of this Circular to the notice of their constituents concerned.

4. The Directions contained in this circular have been issued under section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(B P Kanungo)

Principal Chief General Manage

48 – 4-2-2016


Definition of “Currency”, 2015 – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/313
A.P. (DIR Series) Circular No.48/2015-16 [(1)/15(R)]

February 04, 2016

To

All Category – I Authorised Dealers and Authorised Banks

Madam/ Sir

Definition of “Currency”, 2015

Attention of Authorised Dealers (ADs) is invited to Notification No. FEMA. 15(R)/2015-RB dated December 29, 2015 notified vide G.S.R. No.1008 (E) dated December 29, 2015, which supersedes the Notification No. FEMA 15/2000-RB.

2. Synopsis of the new regulations is given as under:

Debit cards, ATM cards or any other instrument which can be used to create a financial liability may be defined as currency.

3. The new regulations have been notified vide Notification No. FEMA. 15(R)/2015-RB dated December 29, 2015, c.f. G.S.R. No.1008 (E) dated December 29, 2015 and shall come into force with effect from December 29, 2015.

4. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully,

(B P Kanungo)
Principal Chief General Manager

47 – 4-2-2016


Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015 – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/312
A.P. (DIR Series) Circular No.47/2015-16 [(1)/11(R)]

February 04, 2016

To

All Category – I Authorised Dealers and Authorised Banks

Madam/ Sir

Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015

Attention of Authorised Dealers (ADs) is invited to Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015 notified vide Notification No. FEMA. 11(R)/2015-RB dated December 29, 2015, c.f. G.S.R. No.1006 (E) dated December 29, 2015, which supersedes the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 and all amendments thereto.

2. Synopsis of the new regulations is given as under:

A. Following are the limits for possession or retention of foreign currency or foreign coins, namely :-

  1. possession without limit of foreign currency and coins by an authorised person within the scope of his authority ;
  2. possession without limit of foreign coins by any person;
  3. retention by a person resident in India of foreign currency notes, bank notes and foreign currency travellers’ cheques not exceeding US$ 2000 or its equivalent in aggregate, provided that such foreign exchange in the form of currency notes, bank notes and travellers cheques;
    1. was acquired by him while on a visit to any place outside India by way of payment for services not arising from any business in or anything done in India; or
    2. was acquired by him, from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; or
    3. was acquired by him by way of honorarium or gift while on a visit to any place outside India; or
    4. represents unspent amount of foreign exchange acquired by him from an authorised person for travel abroad.

B. A person resident in India but not permanently resident therein may possess without limit foreign currency in the form of currency notes, bank notes and travellers cheques, if such foreign currency was acquired, held or owned by him when he was resident outside India and, has been brought into India in accordance with the regulations made under the Act.

Explanation: for the purpose of this clause, ‘not permanently resident’ means a person resident in India for employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed three years.

3. The new regulations have been notified vide Notification No. FEMA. 11(R)/2015-RB dated December 29, 2015, c.f. G.S.R. No.1006 (E) dated December 29, 2015 and shall come into force with effect from December 29, 2015.

4. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully,

(B P Kanungo)
Principal Chief General Manager

46 – 4-2-2016


Foreign Exchange Management (Realisation, repatriation and surrender of foreign exchange) Regulations, 2015 – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/311
A.P. (DIR Series) Circular No.46/2015-16 [(1)/9(R)]

February 04, 2016

To

All Category – I Authorised Dealers and Authorised Banks

Madam/ Sir

Foreign Exchange Management (Realisation, repatriation and surrender of foreign exchange) Regulations, 2015   

Attention of Authorised Dealers (ADs) is invited to Foreign Exchange Management (Realisation, repatriation and surrender of foreign exchange) Regulations, 2015 notified vide Notification No. FEMA. 9(R)/2015-RB dated December 29, 2015, c.f. G.S.R. No.1005(E) dated December 29, 2015, which supersedes the Foreign Exchange Management (Realisation, repatriation and surrender of foreign exchange) Regulations, 2000 and all amendments thereto.

2. Synopsis of the new regulations is given as under:

A. Duty of persons to realise foreign exchange due:-

A person resident in India to whom any amount of foreign exchange is due or has accrued shall, save as otherwise provided under the provisions of the Act, or the rules and regulations made thereunder, or with the general or special permission of the Reserve Bank, take all reasonable steps to realise and repatriate to India such foreign exchange, and shall in no case do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing -

  1. that the receipt by him of the whole or part of that foreign exchange is delayed; or
  2. that the foreign exchange ceases in whole or in part to be receivable by him.

B. Manner of Repatriation :-

(1) On realisation of foreign exchange due, a person shall repatriate the same to India, namely bring into, or receive in, India and -

  1. sell it to an authorised person in India in exchange for rupees; or
  2. retain or hold it in account with an authorised dealer in India to the extent specified by the Reserve Bank; or
  3. use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank.

(2) A person shall be deemed to have repatriated the realised foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India, maintained with an authorised dealer.

C. Period for surrender of realised foreign exchange:-

A person not being an individual resident in India shall sell the realised foreign exchange to an authorised person, within the period specified below :-

  1. foreign exchange due or accrued as remuneration for services rendered, whether in or outside India, or in settlement of any lawful obligation, or an income on assets held outside India, or as inheritance, settlement or gift, within seven days from the date of its receipt;
  2. in all other cases within a period of ninety days from the date of its receipt.

D. Period for surrender in certain cases:-

(1) Any person not being an individual resident in India who has acquired or purchased foreign exchange for any purpose mentioned in the declaration made by him to an authorised person under sub-section (5) of Section 10 of the Act does not use it for such purpose or for any other purpose for which purchase or acquisition of foreign exchange is permissible under the provisions of the Act or the rules or regulations or direction or order made thereunder, shall surrender such foreign exchange or the unused portion thereof to an authorised person within a period of sixty days from the date of its acquisition or purchase by him.

(2) Notwithstanding anything contained in sub-regulation (1), where the foreign exchange acquired or purchased by any person not being an individual resident in India from an authorised person is for the purpose of foreign travel, then, the unspent balance of such foreign exchange shall, save as otherwise provided in the regulations made under the Act, be surrendered to an authorised person -

  1. within ninety days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of currency notes and coins; and
  2. within one hundred eighty days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of travellers cheques.

E. Period for surrender of received/realised/unspent/unused foreign exchange by Resident individuals.-

A person being an individual resident in India shall surrender the received/ realised/ unspent/ unused foreign exchange whether in the form of currency notes, coins and travellers cheques, etc. to an authorised person within a period of 180 days from the date of such receipt/ realisation/ purchase/ acquisition or date of his return to India, as the case may be.

F. Exemption:-

Nothing in these regulations shall apply to foreign exchange in the form of currency of Nepal or Bhutan.

3. The new regulations have been notified vide Notification No. FEMA. 9(R)/2015-RB dated December 29, 2015, c.f. G.S.R. No.1005 (E) dated December 29, 2015 and shall come into force with effect from December 29, 2015.

4. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully,

(B P Kanungo)
Principal Chief General Manager

45 – 4-2-2016


Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/310
A.P. (DIR Series) Circular No. 45/2015-16 [(1)/6(R)]

February 04, 2016

To

All Authorised Persons

Madam/ Sir

Foreign Exchange Management (Export and Import of Currency) Regulations, 2015

Attention of Authorised Persons is invited to Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 notified vide Notification No. FEMA.6(R)/ 2015-RB dated December 29, 2015, c.f. G.S.R. No.1004 (E) dated December 29, 2015, which supersedes the Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 and all amendments thereto.

2. Synopsis of the new regulations is given as under:

A. Export and import of Indian currency and currency notes

a) Any person resident in India,

  1. may take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding ₹ 25,000 (Rupees Twenty Five Thousand only) per person.
  2. may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.

Explanation:

‘Commemorative Coin’ includes coin issued by Government of India Mint to commemorate any specific occasion or event and expressed in Indian currency.

  1. who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding ₹ 25,000 (Rupees Twenty Five Thousand only) per person.

b) Any person resident outside India, not being a citizen of Pakistan or Bangladesh, and visiting India,

  1. may take outside India currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding ₹ 25,000 (Rupees Twenty Five Thousand only) per person
  2. may bring into India currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding ₹ 25,000 (Rupees Twenty Five Thousand only) per person

B. Import of Foreign Exchange into India

A person,

  1. may send into India without limit foreign exchange in any form other than currency notes, bank notes and travelers cheques;
  2. may bring into India from any place outside India without limit foreign exchange (other than unissued notes) subject to the condition that such person makes, on arrival in India, a declaration to the Customs authorities in Currency Declaration Form (CDF). It shall not be necessary to make such declaration where the aggregate value of the foreign exchange in the form of currency notes, bank notes or travelers cheques brought in by such person at any one time does not exceed US$10,000 (US Dollars ten thousand) or its equivalent and/ or the aggregate value of foreign currency notes brought in by such person at any one time does not exceed US$ 5,000 (US Dollars five thousand) or its equivalent.

C. Export of Foreign Exchange and Currency Notes

  1. An authorised person may send out of India foreign currency acquired in normal course of business,
  2. any person may take or send out of India, -
    1. Cheques drawn on foreign currency account maintained in accordance with Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000;
    2. foreign exchange obtained by him by drawal from an authorised person in accordance with the provisions of the Act or the rules or regulations or directions made or issued thereunder;
    3. currency in the safes of vessels or aircrafts which has been brought into India or which has been taken on board a vessel or aircraft with the permission of the Reserve Bank;
  3. any person may take out of India, -
    1. foreign exchange possessed by him in accordance with the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 ;
    2. unspent foreign exchange brought back by him to India while returning from travel abroad and retained in accordance with the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 ;
  4. any person resident outside India may take out of India unspent foreign exchange not exceeding the amount brought in by him and declared in Currency Declaration Form (CDF).

D. Export and Import of currency to or from Nepal and Bhutan

A person may-

  1. take or send out of India to Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India notes (other than notes of denominations of above ₹ 100 in either case) provided that an individual travelling from India to Nepal or Bhutan can carry Reserve Bank of India currency notes of denomination ₹ 500/- and/or ₹ 1000/- up to a limit of ₹ 25,000/- ;
  2. bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India notes (other than notes of denominations of above ₹ 100 in either case) ;
  3. take out of India to Nepal or Bhutan, or bring into India from Nepal or Bhutan, currency notes being the currency of Nepal or Bhutan.

E. Prohibition on Export of Indian Coins

No person shall take or send out of India the Indian coins which are covered by the Antique and Art Treasure Act, 1972.

3. The new regulations have been notified vide Notification No. FEMA. 6 (R)/2015-RB dated December 29, 2015, c.f. G.S.R. No.1004 (E) dated December 29, 2015 and shall come into force with effect from December 29, 2015.

4. Authorised Persons may bring the contents of the circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully,

(B P Kanungo)
Principal Chief General Manager

44 – 4-2-2016


Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015 – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/309
A.P. (DIR Series) Circular No.44/2015-16 [(1)/10(R)]

February 04, 2016

To

All Category – I Authorised Dealers and Authorised Banks

Madam/ Sir

Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015

Attention of Authorised Dealers (ADs) is invited to A.D.(M.A. Series) Circular No. 11 dated May 16, 2000 in terms of which ADs were advised of various Rules, Regulations, Notifications/ Directions issued under the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act). On a review it is felt necessary to revise the regulations issued under the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000, as amended from time to time. Accordingly, in consultation with the Government of India, the said regulations have been repealed and replaced by the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015.

2. According to the regulations, a “Foreign Currency Account” means an account held or maintained in currency other than the currency of India or Nepal or Bhutan.

3. These regulations seek to regulate opening and maintenance of foreign currency accounts in and outside India by a person resident in India.

4. In terms of Regulation No. 4, a person resident in India may open, hold and maintain with an authorized dealer in India the following accounts, subject to the conditions specified in the regulations (details wherever necessary are given in Annex to this circular):

  1. Exchange Earner’s Foreign Currency (EEFC) Account subject to the terms and conditions of the Exchange Earner’s Foreign Currency Account Scheme (Schedule I to the regulations);
  2. Resident Foreign Currency (RFC) Account out of sources of receipt of foreign exchange mentioned in sub-regulation (B) of the regulations;
  3. Resident Foreign Currency (Domestic) [RFC(D)] Account with an authorised dealer in India out of sources of receipt of foreign exchange mentioned in sub-regulation (C) of the regulations;
  4. Diamond Dollar Account (DDA) – firms and companies who comply with the eligibility criteria stipulated in the Foreign Trade Policy of Government of India, subject to the terms and conditions of the DDA Scheme (Schedule II to the regulations)

5. In addition, in terms of Regulation No. 4, the following persons resident in India can open foreign currency accounts with an authorized dealer in India, subject to the conditions specified in the regulations (details wherever necessary are given in Annex to this circular):

  1. A unit in a Special Economic Zone;
  2. An exporter who is exporting services and engineering goods on deferred payment terms or has undertaken a turnkey project or a construction contract abroad;
  3. Indian agents of foreign airline or shipping companies;
  4. Ship-manning/ crew managing agencies in India;
  5. Project offices set up in India in terms of Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000 dated May 3, 2000, as amended from time to time;
  6. Indian companies receiving Foreign Direct Investment.
  7. Organisers of international seminars, conferences, conventions etc.

6. In terms of Regulation No. 5, the following persons resident in India can open foreign currency accounts outside India subject to the conditions specified in the regulations (details wherever necessary are given in Annex to this circular):

  1. An authorized dealer in India with its branch/ head office/ correspondent outside India;
  2. A branch outside India of a bank incorporated or constituted in India;
  3. An India firm/ company/ body corporate in the name of its foreign office/ branch or its representative posted outside India;
  4. An exporter who is exporting services and engineering goods on deferred payment terms or has undertaken a turnkey project or a construction contract abroad;
  5. An Indian Party [as defined in Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004, as amended from time to time] for making overseas direct investment provided the overseas regulator requires the maintenance of such an account;
  6. A person raising ECB or ADR/ GDR;
  7. Indian shipping or airline companies;
  8. Life Insurance Corporation (LIC) of India or General Insurance Corporation (GIC) of India and its subsidiaries for the purpose of carrying on life/ general insurance business;
  9. A resident individual under the Liberalized Remittance Scheme;
  10. A person going abroad to participate in an exhibition/ trade fair;
  11. A person going abroad for studies;
  12. A person who is on a visit to a foreign country provided the balances are repatriated on return to India;
  13. A foreign citizen resident in India, being an employee of a foreign company, or an Indian citizen, being an employee of a foreign company, in either case on deputation to the office/ branch/ subsidiary/ joint venture/ group company in India;
  14. A foreign citizen resident in India employed with an Indian company

7. In terms of regulation 6, unless otherwise specifically stated, a Foreign Currency Account with an authorized dealer in India under these Regulations may be opened, held and maintained in the form of current or savings or term deposit account in cases where the account holder is an individual, and in the form of current account or term deposit account in all other cases. The account can be held singly or jointly in the name of person eligible to open, hold and maintain such account.

8. The new regulations have been notified vide Notification No. FEMA 10(R)/2015-RB dated January 21, 2016, c.f. G.S.R. No.96 (E) dated January 21, 2016 and shall come into force with effect from January 21, 2016. The Master Direction No. 14 of 2015-16 (Deposits and Accounts) has been updated accordingly to incorporate the above changes.

9. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

10. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully

(B. P. Kanungo)
Principal Chief General Manager


Annex

Foreign currency accounts that can be maintained by residents

I. Exchange Earner’s Foreign Currency (EEFC) Account [Regulation 4(A)]

  1. The terms and conditions under which this account can be opened, held and maintained are laid down in Schedule I to the regulations.
  2. The account will be in the form of a non-interest bearing current account.
  3. The claims settled in rupees by ECGC/ insurance companies should not be construed as export realisation in foreign exchange and the claim amount will not be an eligible credit to the EEFC account.
  4. Authorised Dealers can allow SEZ developers to open, hold and maintain EEFC Account and credit their foreign exchange earnings, as specified in the paragraph 1 of Schedule I.
  5. The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.
  6. Credit Facilities: Credit facilities, both fund-based and non-fund based should not be granted against the balances held in EEFC Accounts.
  7. Exporters can repay packing credit advances, whether availed of in Rupee or in foreign currency, from balances in their EEFC account to the extent exports have actually taken place.
  8. Balances may be credited to NRE/ FCNR(B) accounts, at the option/ request of the account holders consequent upon change of their residential status from resident to non-resident.

II. Resident Foreign Currency (RFC) Account [Regulation 4(B)]

  1. Resident individuals are allowed to open a Resident Foreign Currency (RFC) Account with an AD bank in India out of foreign exchange received as pension, superannuation benefits, conversion of assets referred to in section 6(4) of the Act and other cases as laid down in regulation 4(B). The balances in the Non-Resident External (NRE) Account and Foreign Currency Non-Resident Bank [FCNR (B)] Account can be credited to the RFC account when the residential status of the non-resident Indian (NRI) changes to that of a Resident.

III. Resident Foreign Currency (Domestic) Account (RFC(D)) [Regulation 4(C)]

  1. To enable resident individuals to keep in a bank account the foreign exchange they could retain from the sources mentioned in terms of Regulation 3(iii) of RBI Notification No.FEMA.11(R)/ 2015-RB dated December 29, 2015, they are allowed to open a Resident Foreign currency (Domestic) Account [RFC(D)] with an AD bank in India. This facility is in addition to that provided under of RBI Notification No.FEMA.11(R)/ 2015-RB dated December 29, 2015.
  2. The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.
  3. Balances may be credited to NRE/ FCNR(B) Accounts, at the option/ request of the account holders consequent upon change of their residential status from resident to non-resident.

IV. A unit in a Special economic Zone [Regulation 4(D)]

  1. A unit located in a Special Economic Zone may open hold and maintain a Foreign Currency Account with an authorized dealer to credit all foreign exchange funds received by the unit.
  2. The account can be used for bona fide trade transactions between the unit and a person resident in/ outside India.

V. Diamond Dollar Accounts (DDA) [Regulation 4(E)]

  1. The terms and conditions under which this account can be opened, held and maintained are laid down in Schedule II to the regulations.
  2. The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.

VI. Ship-manning/crew managing agencies in India [Regulation 4(G)(2)]

  1. AD Category – I banks may allow ship-manning/ crew managing agencies in India to open and maintain non-interest bearing foreign currency accounts in India for the purpose of undertaking transactions in the ordinary course of its business, as detailed:
    1. Credits: Only by way of inward remittances through normal banking channels from the overseas principal.
    2. Debits: Towards various expenses in connection with the management of the ships/ crew in the ordinary course of its business.
    3. No credit facility (fund based or non-fund based) should be granted against security of funds held in the account.
    4. The bank should meet the prescribed Reserve Requirements in respect of such accounts.
    5. No EEFC facility should be allowed in respect of the remittances received in the account.
    6. The account will be maintained only during the validity period of the agreement.

VII. Project Offices – Foreign Currency Accounts in India [Regulation 4(G)(3)]

  1. An AD may open non-interest bearing foreign currency account for Project Offices in India subject to the following:
    1. The Project Office has been established in India, with the general/ specific permission of Reserve Bank, having the requisite approval from the concerned Project Sanctioning Authority,
    2. The contract under which the project has been sanctioned, specifically provides for payment in foreign currency,
    3. Each Project has only one Foreign Currency Account.
    4. Debits:
      1. Payment of project related expenditure.
    5. Credits:
      1. Foreign currency receipts from the Project Sanctioning Authority, and
      2. Remittances from parent/ Group Company abroad or bilateral/ multilateral international financing agency.
    6. The Foreign Currency account may be closed at the completion of the project.
    7. Inter-project transfer of funds will be permitted with the prior permission of the Regional Office of the Reserve Bank under whose jurisdiction the Project Office is situated.
    8. In case of disputes between the Project Office and the project sanctioning authority or other Government/Non-Government agencies etc., the balance held in such account shall be converted into INR and credited to a special account which shall be dealt with as per the settlement of the dispute.

VIII. Organisers of international Seminars, Conferences, Conventions etc. [Regulation 4(G)(5)]

  1. Organisers of international Seminars, Conferences, Conventions etc. may hold temporary foreign currency accounts with an AD in India subject to the following conditions:
    1. Credits: All inward remittances in foreign currency towards registration fees payable by overseas delegates, grant, sponsorship fees and donations, received from abroad, in connection with the conference, convention, etc.
    2. Debits: (i) Payment to foreign/ special invitees attending the conference, etc., on the specific invitation of the organisers, towards travel, hotel charges, etc., and honorarium to foreign guest speakers; (ii) Remittance towards refund of registration fees to foreign delegates and unutilised sponsorship/grant amount, if any; (iii) Bank charges, if any; (iv) Conversion of funds into rupees.
    3. All other credits/ debits would require the prior approval of the Reserve Bank.
    4. The account should be closed immediately, after the conference/event is over.

IX. An Indian Corporate raising ECB [Regulation 5(E)(1)

ECB proceeds meant only for foreign currency expenditure can be retained abroad pending utilization. Till utilisation, these funds can be invested in the following liquid assets (a) deposits or Certificate of Deposit or other products offered by banks rated not less than AA (-) by Standard and Poor/ Fitch IBCA or Aa3 by Moody’s; (b) Treasury bills and other monetary instruments of one year maturity having minimum rating as indicated above and (c) deposits with overseas branches / subsidiaries of Indian banks abroad.

No. 51 Dated: 4-2-2016


Issuance of online certificate u/s 195 (2) and 195(3) – Order-Instruction – Dated 4-2-2016 – Income Tax

TDS Instruction No. 51

DIRECTORATE OF INCOME TAX (SYSTEM)

ARA Center, Ground Floor, E-2, Jhandewalan Extension,

New Delhi – 110055

F. No. SW/TDS/02/02/2013/DIT(S)-II

Dated 04.02.2016

To,

The Pr. Chief Commissioner of Income-tax (International Taxation), New Delhi

The Chief Commissioners of Income-tax (International Taxation) Mumbai, Bengaluru

The Commissioners of Income-tax (International Taxation)

Ahmedabad, Bengaluru Chennai, Delhi (I, II & III), Hyderabad, Kolkata, Mumbai (I & II), and Pune

The Commissioners of Income-Tax (L.T.U.)

New Delhi, Mumbai, Bengaluru, Chennai, Kolkata

Sir/Madam,

Sub : Issuance of online certificate u/s 195 (2) and 195(3) – reg.

Request has been received from field formations and tax payers to provide functionality for issue of online certificate u/s 195(2) and 195(3) for lower/no deduction as manual certificates were not being considered during processing of TDS statements by CPC TDS.

2.  In this regard, existing functionality to issue online certificate u/s 197 in ITD application has been enhanced to issue online certificate u/s 195(2) and 195(3) as under:

i.  Assessing Officers of International taxation charges who are authorised to issue certificate u/s 195(2) and195(3) may be assigned the role AR_INT_TAXATION in ITD application by respective Computer Centre through HRMS module, if not already assigned. The certificate type i.e. 197/195(2)/195(3) also needs to be specified.

ii.  For issue of certificate u/s 195(2) and 195(3), jurisdiction restriction of PAN has been relaxed. For issue of certificate u/s 195(3). TAN and Amount has been made optional

iii. As per existing procedure for issue of certificate u/s 197, certificates u/s 195(2) and 195(3) is requied to be approved by Range officer through ITD application.

3. The above functionality may kindly be brought to the notice of AOs under your charge.

Yours faithfully,

(Sanjeev Singh)

Addl. DGIT(S)-2, New Delhi

Invest Karnataka: FM Arun Jaitley asks state to grow 2-3% higher than national GDP : 04-02-2016


BENGALURU: Union Finance Minister Arun Jaitley on Wednesday urged Karnataka to take steps to achieve a growth rate 2-3 per cent higher than the national GDP. Karnataka has the potential to make this feat possible, he said. The centre, he said, will extend all necessary help to the state to facilitate this, he said in his his opening remarks at the 3-day Invest Karnataka meet.

“Karnataka has all human and institutional resources to grow faster than India. Each state in India is  competing with each other in attracting investments. This is the most positive sign of national growth,” the Finance Minister said. The state with consistent track records of stable politics, easy access of land and natural resources are the primary destinations of investments, he added.

There is no other solution to eliminate poverty other than making India grow, Jaitley said.

He hailed India’s federal structure, and said federalism and democracy should be the strength of the government and not the obstacle.

“India is withstanding the adverse effects of the global economic slowdown. We are relatively un-impacted by some of the factors which have caused the global crisis,” he said.

Chief Minister Siddaramaiah in his remarks requested Jaitley to consider allocating more funds to Karnataka in his forthcoming budget to facilitate further growth of the State.

On promoting investments, he said that his government might set up an industry- government partnership body to facilitate a host of services under the Invest Karnataka brand.

“We have taken up many steps in promoting the ease of doing business in Karnataka,” he said.

To make these steps more effective, he said, he is exploring setting up a partnership body, the CM said.

Karnataka, Siddaramaiah said, has received FDI worth $5.2 billion since May 2013.

“We rank as the state with the second highest FDI in India. We have cleared more than 500 projects worth over $20 billion,” he said.

Source : The Economic Times

No. 43 Dated: 4-2-2016


Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015 – Circular – Dated 4-2-2016 – FEMA

RBI/2015-16/308

A.P. (DIR Series) Circular No. 43/2015-16 [(1)/7(R)]

February 04, 2016

To

All Category – I Authorised Dealer and Authorised Banks

Madam/ Sir

Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015

Attention of Authorised Dealers (ADs) is invited to A.D.(M.A. Series) Circular No. 11 dated May 16, 2000 in terms of which ADs were advised of various Rules, Regulations, Notifications/ Directions issued under the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act). On a review it is felt necessary to revise the regulations issued under the Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2000, as amended from time to time. Accordingly, in consultation with the Government of India, the said regulations have been repealed and replaced by the Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015.

2. In terms of these Regulations, acquisition or transfer of any immovable property outside India by a person resident in India would require prior approval of Reserve Bank except in the following cases:

a) Property held outside India by a foreign citizen resident in India;

b) Property acquired by a person on or before 8th July, 1947 and held with the permission of Reserve Bank;

c) Property acquired by way of gift or inheritance from:

i) persons referred to in (b) above;

ii) persons referred to in section 6(4) of the Act;

d) Property purchased out of funds held in Resident Foreign Currency (RFC) account held in accordance with the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015;

e) Property acquired jointly with a relative who is a person resident outside India provided there is no outflow of funds from India;

f) Property acquired by way of inheritance or gift from a person resident in India who acquired such property in accordance with the foreign exchange provisions in force at the time of such acquisition

3. An Indian company having overseas offices may acquire immovable property outside India for its business and residential purposes provided total remittances do not exceed the following limits prescribed for initial and recurring expenses, respectively:

a) 15 per cent of the average annual sales/ income or turnover of the Indian entity during the last two financial years or up to 25 per cent of the net worth, whichever is higher;

b) 10 per cent of the average annual sales/ income or turnover during the last two financial years.

4. For the purpose of these regulations, ‘relative’ in relation to an individual means husband, wife, brother or sister or any lineal ascendant or descendant of that individual.

5. The new regulations have been notified vide Notification No. FEMA 7(R)/2015-RB dated January 21, 2016 c.f. G.S.R. No. 95(E) dated January 21, 2016 and shall come into force with effect from January 21, 2016. The Master Direction No. 12 of 2015-16 (Acquisition and Transfer of Immovable Property under Foreign Exchange Management Act, 1999) has been updated accordingly to incorporate the above changes.

6. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

7. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully

(B. P. Kanungo)

Principal Chief General Manager

Goods and Services Tax Bill: Govt will leave no stone unturned to get GST passed, says Venkaiah Naidu : 03-02-2016


Government would leave no stone “unturned” to get the long-awaited GST bill passed in the budget session of Parliament which would begin after February 20, Parliamentary Affairs Minister Venkaiah Naidu said today.

Government would leave no stone “unturned” to get the long-awaited GST bill passed in the budget session of Parliament which would begin after February 20, Parliamentary Affairs Minister Venkaiah Naidu said today.

Naidu said he hoped that Parliament functions “smoothly” to get important bills, including the Goods and Services Tax (GST), approved, and for this, the government was in “regular touch” with different parties.

“We need to pass GST bill. If we pass GST, it will revolutionise taxation system and according to experts, it will increase our revenue by 1.5 to 2 per cent. It is a very vital reform that is needed in the taxation structure,” he told reporters here.

“We will make every effort to get it passed this time… No stone will be left unturned,” he said, adding that the government was in regular touch with different parties.

Referring to a recent meeting between Prime Minister Narendra Modi, his predecessor Manmohan Singh and Congress president Sonia Gandhi over the matter, the Minister said, “We have tried to understand what are their concerns. We have tried to address those concerns also.”

“There is tremendous public opinion building up across the country in favour of GST.I hope other parties will realise the importance of GST and support,” he said.

Naidu said the government was also looking forward to the clearing of bills on real estate development and regulation and bankruptcy.

“I appeal to all parties, including major opposition party Congress, please see reason and support this bill so that we can bring forward, country and states can prosper,” he said.

He said a meeting of the Cabinet Committee on Parliamentary Affairs (CCPA) had been called on February 4 to discuss about the budget session.

Referring to reports that dates had been fixed for the session, he said, “Nothing has been fixed till now…I can tell you that Parliament session will start after 20th (February) only, that much is clear.”

Clarifying on media reports about him having called an “all-party meeting” regarding the schedule for the budget session, he said it was an informal meeting with leaders of some political parties in states where polls are slated soon.

“Taking the views of those parties who have large presence in those states is important. So I informally called them to take their views in order to finalise the schedule of the budget session,” he added.

Source : Economic Times

No. 2/2016 Dated: 3-2-2016


Procedure, Formats and Standards for ensuring secured transmission of electronic communication including scrutiny assessment u/s 143(3) – Circular – Dated 3-2-2016 – Income Tax

DGIT(S)/DIT(S)-3/AST/Paperless Assessment Proceedings/96/2015-16

Government of India

Ministry of Finance

Central Board of Direct Taxes

Directorate of Income Tax (Systems)

Notification No. 2/2016

New Delhi, 3rd day of February, 2016

Subject: Procedure, Formats and Standards for ensuring secured transmission of electronic communication -reg.

Sub-Section (1) of of Section 282 of the Income Tax Act 1961, (the Act) provides that the service of a notice or summon or requisition or order or any other communication under the Act (hereafter in this section referred to as “communication”) may be made by delivering or transmitting a copy thereof, to the person therein named,-

(a) by post or by such courier services as may be approved by the Board; or

(b) in such manner as provided under the Code of Civil Procedure, 1908 (5 of 1908) for the purposes of service of summons; or

(c) in the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000 (21 of 2000); or

(d) by any other means of transmission of documents as provided by rules made by the Board in this behalf.

Further, Sub-Section (2) of Section 282 of the Income Tax Act 1961 provides that the Central Board of Direct Taxes(‘ Board’) may make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which the communication referred to in sub-section (1) of Section 282 may be delivered or transmitted to the person therein named.

2. Accordingly, Board vide Income-tax (18th Amendment) Rules, 2015 has notified Rule 127 for Service of notice, summons, requisition, order and other communication on 2nd December 2015.

Sub-Clause (b) of Sub Rule (2) of Rule 127 states that:

For communications delivered or transmitted electronically-

(i) email address available in the income-tax return furnished by the addressee to which the communication relates; or

(ii) the email address available in the last income-tax return furnished by the addressee; or

(iii) in the case of addressee being a company, email address of the company as available on the website of Ministry of Corporate Affairs; or

(iv) any email address made available by the addressee to the income-tax authority or any person authorised by such income-tax authority.”

3. Sub Rule (3) of Rule 127 of the Income Tax Rules 1962, states The Principal Director General of Income-tax(Systems) or the Director General of Income-tax(Systems) shall specify the procedure, formats and standards for ensuring secured transmission of electronic communication and shall also be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to such communication.

4. In exercise of the powers delegated by the Board as per Sub Rule (3) of the Income Tax Rules 1962, the Principal Director General of Income tax (Systems) specifies herein the procedure, formats and standards for ensuring secured transmission of electronic communication.

5. For the purposes of this notification, the expression,

i. “electronic communication” means electronic mail or electronic mail message or the display of an electronic record on the website of the Income Tax Department as may be specified.

ii. “electronic mail” and “electronic mail message” (hereinafter referred to as “email”) shall have the meanings as assigned to them in Explanation to section 66A of the Information Technology Act, 2000 (21 of 2000).

iii. “electronic record” means data, record or data generated, image or sound stored, received or sent in an electronic form or micro fiche or computer generated micro fiche as defined in Clause (t) of Subsection (1) of Section 2 of Information Technology Act, 2000 (21 of 2000).

All other expressions shall have the meaning as defined in the Income Tax Act 1961.

6. The procedure, formats and standards for ensuring secured transmission of electronic communication is specified as under:

a. The email address of the assessee to be used for the purpose of electronic communication shall be as specified in Sub-Clause (b)(i) or(ii) or(iii) of Sub Rule 2 of Rule 127 of Income Tax Rules 1962.

b. The assessee may furnish a letter to the Assessing Officer (hereinafter referred to as “AO”) providing any other email address as specified in Sub-Clause (b)(iv) of Sub Rule 2 of Rule 127 of Income Tax Rules 1962.The email address so provided shall be the primary email address for the purpose of issuing electronic communication under this notification once such letter is received by the AO. Otherwise, the existing email as per (a) above would be the primary email.

c. The email address to be used by the AO for the purpose of electronic communication under this notification shall be his official designation based email address under the domain@incometax.gov.in (hereinafter referred to as “designation email”).

d. The AO shall issue all statutory notices/questionnaires including notice u/s 143(2) and notice u/s 142 (1) of the Income Tax Act 1961 from his designation email address to the assessee’s email address.

e. For the purpose of electronic communication, the AO shall attach the scanned copy of the notice under section 143(2) or 142(1) bearing his/her signature in PDF format to the email being sent to the assessee.

f. In response to the notice, assessee shall, using his primary email address, submit the details called for, to the designation email address of the AO.

All supporting documents shall be submitted as attachment in Portable Document Format (PDF) to the email being sent to the AO.
In case the total size of the attachments exceed 10 MB then the assesse shall split the attachment and send in as many emails as may be required to adhere to the limit of attachment size of 10 MB per email. However, in each such attachment, assessee shall specifically clarify the corresponding Notice Number and date in the footer to which the attachment relates and number the pages in continuation for all attachments to ensure proper linkage, e.
g. Any email, in response to the notice issued by the AO, received from the primary email address of the assessee shall be considered as a valid response to the notice.

h. For the purpose of keeping an audit trail of notices/questionnaire issued by AO to assessee and the assessee’s response with supporting documents as attachments, a copy of the email shall be marked to e-assessment@incometax.gov.in with the subject line as under:

Subject in email From AO to assessee – should be in the format: “PAN (eg-XXXXX1234X)- AY (eg-AY201314)- Notice u/s -N” (N is the serial number of the notice. eg. Notice u/s -1, Notice u/s -2 etc.).
Subject in email from assessee to AO- should be in the format: “PAN (eg-XXXXX1234X) – AY (eg- AY201314)-Reply-N” (N is the serial number of the notice eg.Reply-1, Reply-2 etc.).
i. In case of non-delivery of email on the primary email address, the notices shall be sent to other email addresses of the assessee available with the department as mentioned in Sub Rule (2) of Rule 127.

j. In a case where a notice is not sent by email due to any reason including technical reasons such as email failure or mailbox full etc., but sent by other valid mode of service as prescribed in the IT Act 1961, the same shall constitute valid service. The AO shall record reasons in writing for not serving notice by email.

A copy of the email error message as received by the AO will be forwarded to the email ID e-assessment@incometax.gov.in with the Subject line in email as: “PAN (eg-XXXXX1234X)- AY (egAY201314)-Error”
k. In a case where a reply by taxpayer is not sent by email due to technical reasons such as email failure or mailbox full etc., but sent or delivered physically to the AO, the same shall be treated as adequate compliance.

A copy of the email error message as received by the taxpayer will be forwarded to the email ID e-assessment@incometax.gov.in with the Subject line in email as: “PAN (eg-XXXXX1234X)- AY (egAY201314)- Error”
I. All emails sent or received as per this procedure shall be stored in the ITD database and the communication status shall be displayed the assesse’s “My Account” on the E-filing portal – https://incometaxindiaefiling.gov.in which can be accessed by the assessee after login (if the taxpayer has registered with the E-Filing website)

m. For the purpose of this notification, the time and place of Dispatch and receipt of electronic record or electronic communication shall have the same meaning as provided in Section 13 of the Information Technology Act, 2000 (No. 21 of 2000).

n. The AO shall pass the order and attach the scanned copy of the order u/s 143(3) bearing his/her signature in PDF format to the email sent to the assesse and/or cause the order u/s 143(3) to be served as specified in Section 282 of the Income Tax Act 1961.

o. The AO shall place a hard copy of all emails and supporting documents on the relevant assessment file for record purposes.

7. The aforementioned procedure is applicable to the assessment proceedings in respect of select non-corporate assessees as a part of the pilot project on paperless assessment proceedings and can be extended to other assessees or other proceedings as may be notified by the Board subsequently.

(Nishi Singh)

Pr. DGIT (Systems), CBDT

Finance ministry restructures tax policy and data mining wings : 03-02-2016


The finance ministry has altered the structure of policy analysis and data mining wings of its tax department, in line with the recommendations of the Tax Administration Reform Commission (TARC), set up by the previous United Progressive Alliance (UPA) government. The move comes four weeks ahead of the Budget presentation in Parliament.

The tax department will now have Tax Policy Research Unit (TPRU)and Tax Policy Council (TPC) in place of Tax Research Unit and Tax Policy and Legislation.

The Tax Policy Research Unit will have economists, statisticians, operational researchers and legal experts.

The 10-member Tax Policy Council will be headed by Finance Minister Arun Jaitley and have minister of state for finance Jayant Sinha and commerce and industry minister Nirmala Sitharaman among members. The members will include secretaries of key ministries and departments such as finance, economic affairs, commerce, NITI Aayog, revenue, industrial policy and promotion, among others.

“TPRU will prepare for every tax proposal an analysis of legislative intent, expected increase/decrease in tax collection and economic impact,” said a finance ministry statement.

It will be headed by an officer of the level of chief commissioner at functional level alternatively from the Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) for a fixed tenure, who will directly report to the revenue secretary, the statement added.

TPRU will carry out studies on various topics of direct and indirect tax policies and prepare and disseminate papers on tax policy issues. It will also assist TPC, chaired by the finance minister, in taking appropriate tax policy decisions. The Unit will also liaise with state commercial tax departments.

The new arrangement is aimed at bringing consistency, multi-disciplinary inputs, and coherence in tax policy.

The disconnect between the tax policies of CBDT and CBEC has been a key issue of concern, which will be addressed through the decision. The move will sync the tax policies of the two boards to the larger benefit of the ministry of finance and tax payers as a whole.

Sunil Shah, partner, Deloitte Haskins & Sells, said: “The step will enable the government to take an integrated view of direct and indirect taxes and obtain inputs from a broad spectrum of professionals. This will help in the formulation of balanced and forward-looking tax policies.”

TARC, headed by Parthasarathi Shome, a former adviser to the finance minister, had recommended establishing a Tax Council supported by a common tax policy and analysis unit to cater to the needs of both direct and indirect taxes.

For every tax proposal, TPRU will prepare an analysis covering three broad areas – legislative intent behind the proposal; expected change in tax collection; and the likely economic impact through the proposal.

Besides, the Tax Policy Council will look at all the research findings of TPRU and suggest broad policy measures for taxation.


WINGS REJIG

  • The finance ministry has altered the structure of policy analysis and data mining wings of its tax department, in line with the recommendations of the Tax Administration Reform Commission (TARC), set up by the previous United Progressive Alliance (UPA) government
  • The move comes four weeks ahead of the Budget presentation in Parliament
  • The tax department will now have Tax Policy Research Unit (TPRU) and Tax Policy Council in place of Tax Research Unit and Tax Policy and Legislation
  • The Tax Policy Research Unit will have economists, statisticians, operational researchers and legal experts

Notification No. : 3/2016 Dated: 3-2-2016


Seeks to amend Notification No. 45/2001 – CE (NT) dated 26th June, 2001, as amended, to allow export of material/equipment under bond, without payment of Central Excise duty, for Kholongchhu Hydro-Electric Project (KHEP) in Bhutan – 3/2016 – Dated 3-2-2016 – Central Excise – Non Tariff

Government of India

Ministry of Finance

(Department of Revenue)

Notification No. 3/2016-Central Excise (N.T.)

New Delhi the 3rd February, 2016

G.S.R. (E).- In exercise of the powers conferred by sub-rules (1) and (3) of rule 19 of the Central Excise Rules, 2002, the Central Board of Excise and Customs hereby makes the following further amendment in the notification of the Government of India, in the Ministry of Finance, Department of Revenue, No. 45/2001-Central Excise (N.T.), dated the 26th June, 2001 published in the Gazette of India, Extraordinary vide number G.S.R. 474(E), dated the 26th June, 2001,namely:-

In the said notification, paragraph 1, in sub-paragraph (5),-

(i)  For the marginal heading, the following marginal heading shall be substituted, namely:-

“Export of all excisable goods without payment of duty to Kurichu Hydro Electric Project, Tala Hydro Electric Project, Punatsangchhu- I Hydro  Electric Project,  Punatsangchhu-II Hydro Electric Project,  Mangdechhu Hydro Electric Project and Kholongchhu Hydro Electric Project in Bhutan”;

(ii)  for the words “Kurichu Hydro Electric Project, Tala Hydro Electric Project, Punatsangchhu-I Hydro Electric Project, Punatsangchhu-II Hydro Electric Project and Mangdechhu Hydro Electric Project ” the words “Kurichu Hydro Electric Project, Tala Hydro Electric Project, Punatsangechhu-I Hydro Electric Project, Punatsangchhu-II Hydro-Electric Project, Mangdechhu Hydro-Electric Project and Kholongchhu Hydro Electric Project” shall be substituted.

[F.No.116/31/2015-CX.3]

(Shankar Prasad Sarma)

Under Secretary to the Government of India

Note:- The principal notification No. 45/2001-Central Excise (N.T.), dated the 26th June, 2001 was published vide G.S.R. 474(E), dated the 26th June, 2001 and was last amended vide notification No. 08/2008-Central Excise (N.T.) dated 11th February, 2008 G.S.R. 81(E), dated the 11th February, 2008.

Notification No. : 03/2016 Dated: 3-2-2016


Seeks to amend notification No. 39/2012- ST, dated the 20th June, 2012 so as to provide for rebate of Swachh Bharat Cess paid on all services, used in providing services exported in terms of rule 6A of the Service Tax Rules – 03/2016 – Dated 3-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 03/2016-Service Tax

New Delhi, the 3rd February, 2016

G.S.R.….(E).- In exercise of the powers conferred by rule 6A of the Service Tax Rules, 1994, the Central Government, hereby makes following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 39/2012  Service Tax, dated the 20th  June, 2012, published in the Gazette of India, Extraordinary, vide number G.S.R. 481(E), dated the 20th June, 2012, namely:-

In the said notification, in Explanation 1, after clause (c), the following clause shall be inserted, namely:-

(d) Swachh Bharat Cess as levied under sub-section (2) of section 119 of the Finance Act, 2015 (20 of 2015).”

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)

Under Secretary to the Government of India

Note: The principal notification was published in the gazette of India, Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 39/2012  Service Tax, dated the 20th June, 2012 vide number G.S.R. 481(E), dated the 20th June, 2012.

Notification No. : 02/2016 Dated: 3-2-2016


Seeks to amend notification No. 12/2013- ST, dated the 1st July, 2013 so as to allow refund of Swachh Bharat Cess paid on specified services used in an SEZ – 02/2016 – Dated 3-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 02/2016-Service Tax

New Delhi, the 3rd February, 2016

G.S.R.….(E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), read with sub-section (5) of section 119 of the Finance Act, 2015 (20 of 2015), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes following further amendments in the  notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2013 Service Tax, dated the 1st July, 2013 , published in the Gazette of India, Extraordinary, vide number G.S.R. 448(E), dated the 1st July, 2013, namely:-

In the said notification, in paragraph 3, in sub-paragraph (III), after clause (b), the following clause shall be inserted, namely:-

““(ba) the SEZ Unit or the Developer shall be entitled to-

  1. refund of the Swachh Bharat Cess paid on the specified services on which ab-initio exemption is admissible but not claimed; and
  2. the refund of amount as determined by multiplying total service tax distributed to it in terms of clause (a)  by effective rate of Swachh Bharat Cess and dividing the product by rate of service tax specified in section 66Bof the Finance Act, 1994.””.

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)

Under Secretary to the Government of India

Note.- The principal notification was published in the Gazette of India, Extraordinary,  by notification No. 12/2013 – Service Tax, dated the 1st July, 2013, vide number G.S.R. 448 (E), dated the 1st July, 2013 and last amended bynotification No. 7/2014  Service Tax, dated the 11th July, 2014 vide number G.S.R. No. 476(E), dated the 11th July, 2014.

Notification No. : 01/2016 Dated: 3-2-2016


Seeks to amend notification No. 41/2012- ST, dated the 29th June, 2012 so as to allow refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods for the export of the said goods and to increase the refund amount commensurate to the increased service tax rate – 01/2016 – Dated 3-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 01/2016-Service Tax

New Delhi, the 3rd February, 2016

G.S.R.….(E).- In exercise of the powers conferred by section 93A of the Finance Act, 1994 (32 of 1994), the Central Government, hereby makes following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 41/2012 Service Tax, dated the 29th June, 2012, published in the Gazette of India, Extraordinary, vide number G.S.R. 519(E), dated the 29th June, 2012, namely:-

In the said notification,-

(a) in the Explanation,-

(I) In clause (A), for sub-clause (i), the following sub-clause shall be substituted, namely:-

(i) in the case of excisable goods, taxable services that have been used beyond factory or any other place or premises of production or manufacture of the said goods, for their export;”;

(II) clause (B) shall be omitted;

(b) in the Schedule of rates, in column (4),-

(i)            for the  figures “0.04”, wherever they occur, the figures “0.05”shall be substituted;

(ii)           for the  figures “0.06”, wherever they occur, the figures “0.07”shall be substituted;

(iii)          for the  figures “0.08”, wherever they occur, the figures “0.09”shall be substituted;

(iv)         for the  figures “0.12”, wherever they occur, the figures “0.14”shall be substituted;

(v)          for the figures “0.18”, wherever they occur, the figures “0.21”shall be substituted; and

(vi)         for the  figures “0.20”, wherever they occur, the figures “0.23”shall be substituted.

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)

Under Secretary to the Government of India

Note: The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 41/2012 Service Tax, dated the 29th June, 2012 vide number G.S.R. 519(E), dated the 29th June, 2012.

Notification No. : 03/2016 Dated: 3-2-2016


Seeks to amend notification No. 39/2012- ST, dated the 20th June, 2012 so as to provide for rebate of Swachh Bharat Cess paid on all services, used in providing services exported in terms of rule 6A of the Service Tax Rules – 03/2016 – Dated 3-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 03/2016-Service Tax

New Delhi, the 3rd February, 2016

G.S.R.141(E).- In exercise of the powers conferred by rule 6A of the Service Tax Rules, 1994, the Central Government, hereby makes following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 39/2012  Service Tax, dated the 20th  June, 2012, published in the Gazette of India, Extraordinary, vide number G.S.R. 481(E), dated the 20th June, 2012, namely:-

In the said notification, in Explanation 1, after clause (c), the following clause shall be inserted, namely:-

(d) Swachh Bharat Cess as levied under sub-section (2) of section 119 of the Finance Act, 2015 (20 of 2015).”

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)

Under Secretary to the Government of India

Note: The principal notification was published in the gazette of India, Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 39/2012  Service Tax, dated the 20th June, 2012 vide number G.S.R. 481(E), dated the 20th June, 2012.

Notification No. : 02/2016 Dated: 3-2-2016


Seeks to amend notification No. 12/2013- ST, dated the 1st July, 2013 so as to allow refund of Swachh Bharat Cess paid on specified services used in an SEZ – 02/2016 – Dated 3-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 02/2016-Service Tax

New Delhi, the 3rd February, 2016

G.S.R.140(E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), read with sub-section (5) of section 119 of the Finance Act, 2015 (20 of 2015), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes following further amendments in the  notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2013 Service Tax, dated the 1st July, 2013 , published in the Gazette of India, Extraordinary, vide number G.S.R. 448(E), dated the 1st July, 2013, namely:-

In the said notification, in paragraph 3, in sub-paragraph (III), after clause (b), the following clause shall be inserted, namely:-

““(ba) the SEZ Unit or the Developer shall be entitled to-

  1. refund of the Swachh Bharat Cess paid on the specified services on which ab-initio exemption is admissible but not claimed; and
  2. the refund of amount as determined by multiplying total service tax distributed to it in terms of clause (a)  by effective rate of Swachh Bharat Cess and dividing the product by rate of service tax specified in section 66Bof the Finance Act, 1994.””.

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)

Under Secretary to the Government of India

Note.- The principal notification was published in the Gazette of India, Extraordinary,  by notification No. 12/2013 – Service Tax, dated the 1st July, 2013, vide number G.S.R. 448 (E), dated the 1st July, 2013 and last amended bynotification No. 7/2014  Service Tax, dated the 11th July, 2014 vide number G.S.R. No. 476(E), dated the 11th July, 2014.

Notification No. : 01/2016 Dated: 3-2-2016


Seeks to amend notification No. 41/2012- ST, dated the 29th June, 2012 so as to allow refund of service tax on services used beyond the factory or any other place or premises of production or manufacture of the said goods for the export of the said goods and to increase the refund amount commensurate to the increased service tax rate – 01/2016 – Dated 3-2-2016 – Service Tax

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

NOTIFICATION No. 01/2016-Service Tax

New Delhi, the 3rd February, 2016

G.S.R. 139 (E).- In exercise of the powers conferred by section 93A of the Finance Act, 1994 (32 of 1994), the Central Government, hereby makes following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 41/2012 Service Tax, dated the 29th June, 2012, published in the Gazette of India, Extraordinary, vide number G.S.R. 519(E), dated the 29th June, 2012, namely:-

In the said notification,-

(a) in the Explanation,-

(I) In clause (A), for sub-clause (i), the following sub-clause shall be substituted, namely:-

(i) in the case of excisable goods, taxable services that have been used beyond factory or any other place or premises of production or manufacture of the said goods, for their export;”;

(II) clause (B) shall be omitted;

(b) in the Schedule of rates, in column (4),-

(i)            for the  figures “0.04”, wherever they occur, the figures “0.05”shall be substituted;

(ii)           for the  figures “0.06”, wherever they occur, the figures “0.07”shall be substituted;

(iii)          for the  figures “0.08”, wherever they occur, the figures “0.09”shall be substituted;

(iv)         for the  figures “0.12”, wherever they occur, the figures “0.14”shall be substituted;

(v)          for the figures “0.18”, wherever they occur, the figures “0.21”shall be substituted; and

(vi)         for the  figures “0.20”, wherever they occur, the figures “0.23”shall be substituted.

[F. No. 332/18/2015-TRU ]

(K. Kalimuthu)

Under Secretary to the Government of India

Note: The principal notification was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide notification No. 41/2012 Service Tax, dated the 29th June, 2012 vide number G.S.R. 519(E), dated the 29th June, 2012.

No. F. No. 312/109/2015-OT Dated: 29-1-2016


 

Issue of refunds – procedure to be followed in other cases where notice under Section 245 has been issued for ITRs processed in F.Y. 15-16 – Circular – Dated 29-1-2016 – Income Tax

F. No. 312/109/2015-OT

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Room No. 281, Hotel Samrat

Kautilya Marg, Chanakya Puri

New Delhi – 110021

Telefax : 011-24101573

Mail – Salil.mishra@nic.in

New Delhi, 29th January 2016

OFFICE MEMORANDUM

Sub : Issue of refunds – procedure to be followed in other cases where notice under Section 245 has been issued for ITRs processed in F.Y. 15-16-regarding

I am directed to refer to the Board O.M. of even number dated 14th January 2016 regarding issue of refunds upto ₹ 5000/-, and refunds in cases where outstanding arrears are upt ₹ 5000/-, without any adjustment of outstanding arrears.

2.  In this regard, I am further directed to convey the decision of the Board that following procedure is to be adopted in other cases, which are not covered by the aforementioned relaxation, and where notice under Section 245 has been issued to the taxpayer : -

a) In cases where that tax payer has contested the demand, CPC would issue a reminder to the jurisdictional Assessing Officers about the contention of the taxpayer, asking them to either confirm, or make appropriate changes, to the demand, within thirty days. In case no response is received from the jurisdictional Assessing Officer, within the stipulated period of thirty days, CPC would issue the refund without any adjustment. The responsibility of non-adjustment of refund against outstanding arrears, if any, would lie with the Assessing Officer.

b) In cases where there is no response from the taxpayer, CPC would issue a reminder to the taxpayer, asking to either agree or disagree with the demand, and submit response on the e-filling portal, within thirty days. In case no response is received from the taxpayer, within the stipulated period of thirty day, CPC would adjust the demand, along with applicable interest u/s 220(2), against the refund due and issue the balance refund, if any, to the taxpayer.

3.  In view of above, it is requested that all Assessing Officers in your region may kindly be directed to follow the aforementioned procedure in respect of pending refund cases, not covered by the earlier OM dated 14th January 2016.

4.  This issues with the approval of Chairman, CBDT.

Yours faithfully,

(Salil Mishra)

Director (OT&WT)

All Principal Chief Commissioners of Income Tax

Copy to : -

1.  All Members of the Board for kind information

2.  The Pr. Director General of Income Tax (Systems)

3.  Database Cell for placing the O.M. on the website.

(Salil Mishra)

Director (OT&WT)

 

Notification No. : S.O. 408(E) Dated: 2-2-2016


Amendment in Notification No. S.O.2272(E) dated 22nd July, 2013 – S.O. 408(E) – Dated 2-2-2016 – Special Economic Zone

MINISTRY OF COMMERCE AND INDUSTRY

(Department of Commerce)

NOTIFICATION

New Delhi, the 2nd February, 2016

S. O. 408(E).-The Central Government, in exercise of the powers conferred by  sub-section (1) read with subsection (5) of Section 31 of the Special Economic Zones Act, 2005 (28 of 2005), hereby makes the following amendment in the notification of the Ministry of Commerce and Industry, Department of Commerce, number S. O. 2272 (E) dated 22nd  July, 2013, namely :-

In the said notification, the entries at SI No.5 & 6 shall be substituted as under :

5. Smt. Angeline Viji Samuel, Chief Financial Officer, M/s. Venture Lighting India Ltd.

6. Sh. R. Govindaraj, Managing Director, M/s. Pharmazell (I) Pvt. Ltd.

[F. No. A-20/1/2006-SEZ]

Dr. GURUPRASAD MOHAPATRA, Jt. Secy.

RBI’s Rajan puts ball in Arun Jaitley’s court: 5 takeaways from monetary policy review : 02-02-2016


NEW DELHI: Putting the ball in Finance Minister Arun Jaitley’s court, RBI governor Raghuram Rajan on Tuesday said that further rate cuts by the central bank will be contingent on reform measures announced in the Union Budget 2016.

“The Indian economy is currently being viewed as a beacon of stability because of the steady disinflation, a modest current account deficit and commitment to fiscal rectitude. This needs to be maintained so that the foundations of stable and sustainable  growth are strengthened,” Rajan said.

According to Rajan, the current momentum of growth is reasonable, though below what should be expected over the medium term. “Underlying growth drivers need to be rekindled to place the economy durably on a higher growth trajectory. The revival of private investment, in particular, has a crucial role, especially as the climate for business improves and fiscal policy continues to consolidate,” he said.

According to Rajan, the current momentum of growth is reasonable, though below what should be expected over the medium term. “Underlying growth drivers need to be rekindled to place the economy durably on a higher growth trajectory. The revival of private investment, in particular, has a crucial role, especially as the climate for business improves and fiscal policy continues to consolidate,” he said.

We take a look at five key takeaways from Raghuram Rajan’s monetary policy review  statement:

1) Over to Union Budget: According to Rajan, reforms meant to boost growth will create more room for monetary policy easing. “Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17,” he said.

“The Reserve Bank continues to be accommodative even as it leaves the policy  rate unchanged in this review, while awaiting further data on the development of inflation,” he added.

2) Growth to strengthen: For 2016-17, growth is expected to strengthen gradually, notwithstanding significant headwinds. “Expectations of a normal monsoon after two consecutive years of rainfall deficiency, the large positive terms of trade gain, improving real incomes of households and lower input costs of firms should contribute to strengthening the growth momentum.  Yet, still weak domestic private investment demand in a phase of balance sheet adjustments, re-emergence of concerns relating to stalled projects, excess capacity in industry, sluggish external demand conditions dampening export growth could act as headwinds. Based on an assessment of the balance of risks, GVA growth for 2016-17 is projected at 7.6%

3) Sector-wise prospects: “Prospects for the rabi harvest are improving slowly. The near-term outlook for industrial activity may be constrained by adverse base effects in Q4 and still weak exports, although the pick-up in corporate profitability on the back of declining input costs may provide an offset. Some categories of services are likely to gain momentum on expectations of higher activity in coming months, though the aggregate state of activity remains muted. On balance,  therefore, GVA growth for 2015-16 is kept unchanged at 7.4 per cent with a downside bias,” RBI said.

4) Outlook on inflation: According to RBI, “Inflation has evolved closely along the trajectory set by the monetary policy stance. With unfavourable base effects on the ebb and benign prices of fruits and vegetables and crude oil, the January 2016 target of 6% should be met.”

“Going forward, under the assumption of a normal monsoon and the current level of international crude oil prices and exchange rates, inflation is expected to be inertial and be around 5 per cent by the end of fiscal 2016-17. However, the implementation of the VII Central Pay Commission award, which has not been factored into these projections, will impart upward momentum to this trajectory for a period of one to two years,” RBI cautioned.

“The Reserve Bank will adjust the forecast path as and when more clarity emerges on the timing of implementation. Vagaries in the spatial and temporal distribution of the monsoon and the impact of adverse geo-political events on commodity prices and financial markets add additional uncertainty to the baseline.”

5) Steps for ease of doing business: RBI will take steps to ease doing business and contribute to an ecosystem that is conducive for growth of start-ups. “These measures will create an enabling framework for receiving foreign venture capital, differing contractual structures embedded in investment instruments, deferring receipt of considerations for transfer of ownership, facilities for escrow arrangements and simplification of documentation and reporting procedures,” the central bank said.

Source : The Hindu

FM Arun Jaitley’s budget homework : 02-02-2016


Four weeks ahead of the NDA govt’s third Budget, FM Arun Jaitley faces some difficult math & an economy that’s barely improving.

He needs to keep capital spending up to spark an investment revival even while finding funds to meet pay commission obligations & staying the course on fiscal consolidation. ET looks at key issues that will shape this Budget.

FM Arun Jaitley’s budget homework
Source : PTI

No. 40 Dated: 1-2-2016


Foreign Direct Investment –Reporting under FDI Scheme, Mandatory filing of form ARF, FCGPR and FCTRS on e-Biz platform and discontinuation of physical filing from February 8, 2016 – Circular – Dated 1-2-2016 – FEMA

RBI/2015-16/303
A.P. (DIR Series) Circular No. 40

February 01, 2016

To

All Category – I Authorised Dealer Banks

Madam / Sir,

Foreign Direct Investment –Reporting under FDI Scheme, Mandatory filing of form ARF, FCGPR and FCTRS on e-Biz platform and discontinuation of physical filing from February 8, 2016

Attention of Authorised Dealers Category-I (AD Category – I) banks is invited to the provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations 2000, notified by the Reserve Bank vide Notification No. FEMA 20/2000-RB, dated 3rd May 2000, as amended from time to time. Attention of AD Category – I banks is also invited to A.P. (DIR Series) Circular No.102 dated February 11, 2014; A.P. (DIR Series) Circular No.6 dated July 18, 2014; A.P.(DIR Series) Circular no.77 dated February 12, 2015; A.P.(DIR Series) Circular No. 95 dated April 17, 2015 and A.P.(DIR Series) Circular No.9 August 21, 2015.

2. With a view to promoting the ease of reporting of transactions related to Foreign Direct Investment (FDI), the Reserve Bank of India, under the aegis of the e-Biz project of the Government of India has enabled online filing of the following returns with the Reserve Bank of India viz.

- Advance Remittance Form (ARF) which is used by the companies to report the FDI inflows to RBI;

- FCGPR Form which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow; and

- FCTRS Form which is submitted to RBI for transfer of securities between resident and person outside India.

3. At present both the options, i.e. online filing and physical filing of abovementioned forms, are available to the users.

4. Based on the experience it has been decided that beginning February 8, 2016 the physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted.

5. AD Category-I banks may bring the contents of this circular to the notice of their customers / constituents concerned. They are advised to extend necessary guidance/ assistance to their constituents for uploading the abovementioned forms on the e-Biz platform.

6. The directions contained in this circular have been issued under section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(B. P. Kanungo)
Principal Chief General Manager

Budget 2016: Swiping your card may help you save tax : 01-02-2016


MUMBAI: Swiping cards and paying through digital wallets could become something more than a convenience and all about tax savings. The government may announce tax benefits for non-cash transactions in this year’s Budget following recommendations made by the Payments Council of India (PCI).

“We are extremely confident that in this year’s Budget, merchants and customers will get a major incentive from the government for digital transactions. This government is very serious about the Digital India push,” said Paresh Rajde, managing director of Suvidhaa Infoserv and a member of the PCI committee that formulated the recommendations.

In the submission to the ministry in December, a copy of which is with ET, the umbrella body for all payments companies of the country said, “To incentivise players in the market to operate payment gateway systems and also to ensure capital for investment in further development of such solutions, we recommend offering tax incentives/tax holidays to such businesses.”

The government said in one of its communications to the council that merchants with more than 50% of their transactions done digitally could get a tax rebate or a 1-2% reduction in value-added tax on all electronic transactions. Consumers could get some income tax rebates if they showed a certain portion of their net expenses was incurred digitally.

The government also plans to do away with the convenience fee charged for online utility bill payments. “Payments companies are helping in the process of financial inclusion, but our business works on thin margins and longer gestation periods, hence we should be treated at par with infrastructure companies and the government should look into the tax issues we are facing,” said Naveen Surya, chairman of PCI.
The committee also recommended that the government look into the matter of tax deducted at source, which blocks working capital for payment aggregators. “We have to pay a hefty fee to the acquiring bank for every transaction and the margin for our trade is very thin. Often, because of TDS, we have to pay the government from our own pockets because we are not profitmaking and by the time the returns come, my business is already in the doldrums,” said Ketan Doshi, managing director of PayPoint India.

Rajde said that for India to realise the dream of digitisation, doing electronic transactions is important. “We have seen the Korea model where they shifted from a cash-heavy society to digital. This was achieved through incentivisation,” he said.

FM likely to announce 4 major ports in Budget : 01-02-2016


Finance Minister Arun Jaitley is likely to propose four new major ports to be constructed, in the Budget for 2016-17. These ports would be at Dahanu (Andhra Pradesh), Colachel (Tamil Nadu), Sagar (West Bengal) and Dugarajapatnam (Andhra Pradesh) at an estimated cost of Rs 32,000 crore, sources said.

Spanning 13 maritime states and Union territories, India’s 7,516.6-km coastline is serviced by 12 major ports, and 200 notified minor and intermediate ports. The 12 major ports are Chennai, Cochin, Jawahar Lal Nehru, Kamarajar, Kandla, Kolkata and Haldia, Mormugao, Mumbai, New Mangalore, Paradip, V O Chidambaranar, and Vishakhapatnam. In 2014-15, these ports handled 581.33 million tonnes (mt) of traffic.
Read our full coverage on Union Budget 2016

A study by Mckinsey and Aecom for the shipping ministry underlined the need of building coastal capacities to meet future cargo volume. The study notes Indian ports handled 857 mt of bulk cargo in 2013-14. It estimates that in 2025, bulk traffic will increase to 1,850 mt a year. Exim bulk will rise four per cent to reach 1,000 mt a year. The growth in export-import cargo will remain muted due to increase in production of coal and continued weak global demand for iron ore. The coastal bulk traffic, however, will grow at the rate of 22 per cent to reach 750 mt by 2025. This would require building dedicated coastal capacities at specific ports.

The study also states that Indian ports handled 10.7 million TEU (twenty foot equivalent unit) container traffic in 2013-14. Container traffic has grown at eight per cent over the past decade as the level of containerisation also increased from 60 per cent in 2004-5 to 67 per cent in 2013-14. The study estimates that container traffic will grow at 6.5 per cent rate under ‘business-as-usual’ and reach 21.5 million TEU by 2025. With programmes such as ‘Make in India’ and development of industrial corridor, the estimated traffic can grow to 24-25 million TEU.

Currently, the handling capacity of major ports in India is sufficient to match trade demand. The capacity of all the major ports as on March 31, 2015 was 871.52 mt, compared with 581.33 mt in cargo traffic handled through 2014-15. The government has taken several measures to improve operational efficiency through mechanisation, deepening the draft and speedy evacuations.

In these ports, capacity increased by 71 mt, traffic grew 4.6 per cent, average turn-around time on port account improved to 2.13 days and operating ratio to 67.2 per cent in 2014-15.

Source : PTI

RBI, FinMin on same page on fiscal prudence : 01-02-2016


Days after Reserve Bank of India Governor Raghuram Rajan made public his opinion that the government should stick to fiscal prudence, senior government officials said he had also written to the finance ministry about it.

The note from the governor was a reflection of the close coordination between North Block and Mint Road in a difficult financial year, a senior official said.

This made it easier for the mandarins to decide to stick to the target for reduction in the fiscal deficit while firming up the Budget numbers.

According to an official, strong support from RBI to the finance ministry would make it easier to maintain fiscal discipline in a year of massive challenges for the world economy. One official said it was only after the finance ministry and RBI closed ranks that the governor decide to make public his position.

At the C D Deshmukh memorial lecture on Friday, Rajan had backed fiscal consolidation over “aggressive” policies to boost economic growth.

While RBI governors and their teams have interacted with finance ministry mandarins in the budgeting exercise earlier as well, such a public endorsement before a Budget’s presentation by the finance minister was rare.

In the note, Rajan was learnt to have said it did not make any sense for the government to fall short of its fiscal marksmanship by a narrow margin.

In other words, if the government planned to opt for a fiscal stimulus and change the goalposts, it should be decided up front as a policy and should be explained to the financial markets.

“It would only lower India’s commitment to fiscal discipline if we came up short by a slim margin,” one of the officials explained.

The government has been beset with difficulties attempting to reconcile the need to push additional public investment to make the economy grow faster, and balancing it with a tepid growth in taxes and other receipts.

It can only do so by borrowing more from the markets. But Rajan’s argument against this would help the finance ministry with an additional line of argument to keep the books balanced instead. The government has already deviated from the fiscal consolidation path in FY16, postponing fiscal deficit targets by a year. Its plan to bring down the fiscal deficit to 3.6 per cent of GDP in 2015-16 has been postponed by a year.

The government was now targeting 3.9 per cent in the current financial year and 3.5 per cent in the next year.

Along with the Centre, even the state governments have opened up borrowing from foreign investors. Smart City and other projects, which require financing, would follow soon.

The costs of borrowings would shoot up if the fiscal targets come unstuck. Ratings agencies would be uncomfortable if the fiscal targets became wobbly. It is in this context that Rajan had cautioned against fiscal profligacy to spur growth, even as Jaitley has so far remained publicly non-committal on fiscal slippages.

The finance minister had said there were pros and cons of pushing growth by higher public spending and he would take a view on the issue at the time of the Budget. The Budget for 2016-17 would be unveiled on February 29

Source : Business Standard

No. 2/2016 Dated: 15-1-2016


Whether Hindu Undivided Family (HUF)/ its Karta can become partner/ Designated Partner (DP) in Limited Liability Partnership (LLP) – Dated 15-1-2016 – Companies Law

General Circular No. 2/2016

F.No.1/13/2012 CL-V

Government of India

Ministry of Corporate Affairs

5th Floor, ‘A’ Wing, Shastri Bhavan

Dr. R.P. Road, New Delhi-110001

Dated: 15th January, 2016

All the RDs,

All the ROCs/OLs

All stakeholders,

Subject: Whether Hindu Undivided Family (HUF)/ its Karta can become partner/ Designated Partner (DP) in Limited Liability Partnership (LLP).

Sir,

Reference  is  invited to General Circular No. 13/2013 wherein,  in paragraph 2, it has been clarified that ‘as persection 5 of LLP Act, 2008 only an individual or body corporate may be a partner in a Limited Liability Partnership. A HUF cannot be treated as a body corporate for the purposes of LLP Act, 2008. Therefore, a HUF or its Karta cannot become partner or designated partner in LLP’.

2. However, the clarification inadvertently does not mention partner in the last sentence of the paragraph quoted above which has been pointed out by a stakeholder. It is hereby clarified that a HUF or its Karta cannot become partner or designated partner in LLP.

3. This issues with the approval of the Secretary, MCA.

Yours faithfully,

(Kamna Sharma)

Deputy Director

ET GBS: Indian economy can grow at 8% in the coming fiscal year, says Jayant Sinha : 30-01-2016


Minister of state for finance Jayant Sinha at The Economic Times Global Business Summit said that the government has developed a new financial architecture of India and with this scale and growth it will be a game changer for the country.

“Phase one of the JAM trinity was about vision, the second phase was bringing a range of simple financial products to every Indian and the third phase is to provide access,” he said, adding that the government has given 23 banking licenses and opened
up the entry to the banking sector.

On the revised growth estimates Sinha said that it is a very routine matter for GDP numbers to revised. “So we should just wait for the dust to settle and to see what the final numbers would be,” he said, adding that as the legacy problems diminishes the economy will gather momentum.

On bank capital infusion Sinha said that the government is working closely with the RBI and banks to ensure all of our PSU banks meet their capital adequacy fully compliant with RBI requirement and Basel 3 requirement. “We are fully there to support our banks,” he said.

Source : The Hindu

Notification No. : 4/2016 Dated: 30-1-2016


Seeks to further amend notification No 12/2012-Central Excise dated 17.03.2012 so as to increase the Basic Excise Duty rates on Petrol and Diesel(both unbranded and branded) – 4/2016 – Dated 30-1-2016 – Central Excise – Tariff

MINISTRY OF FINANCE

(Department of Revenue)

NOTIFICATION No. 4/2016-Central Excise

New Delhi, the 30th  January, 2016

G.S.R. 131(E).-In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.12/2012-Central Excise, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide G.S.R. 163(E), dated the 17th March, 2012, namely: -

In the said notification, in the Table,-

(i) in serial number 70,-

(a) against item (i) of column (3), for the entry in column (4), the entry “Rs. 9.48 per litre” shall be substituted;

(b) against item (ii) of column (3), for the entry in column (4), the entry “Rs. 10.66 per litre” shall be substituted;

(ii) in serial number 71,-

(a) against item (i) of column (3), for the entry in column (4), the entry “Rs. 11.33 per litre” shall be substituted;

(b) against item (ii) of column (3), for the entry in column (4), the entry “Rs. 13.69 per litre” shall be substituted;

2. This notification shall come into force with effect from the 31st day of January, 2016.

[F. No. 354/123/2014 -TRU]

ANURAG SEHGAL, Under Secy.

Note.- The principal notification No. 12/2012-Central Excise, dated the 17th March, 2012 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 163(E) dated the 17th March, 2012 and was last amended vide notification No.2/2016-Central Excise, dated the 15th January, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R.77(E) dated the 15th January, 2016.

Valuation of joint development projects – Confusion galore : 29-01-2016


Taxindiaonlinelogo-jpg    JANUARY 29, 2016

By S Sivakumar, LL.B., FCA, FCS, ACSI, MBA, Advocate and R Vaidyanathan, M.Com., M.Phil, Consultant

THE Ministry of Finance, TRU has been very kind enough to issue an Instruction F.No. 354/311/2015-TRU dated January 20, 2016, ‘clarifying’, based on a so-called report of the High Level Committee, an issue which has seen contradictory views being expressed by the very same Board on different occasions. The DDT aptly called it a case of Board vs Board.

In its latest circular, the Board reaffirms its view expressed in its earlier Circular No.151/2/2012-ST dated 10-2-2012 while admitting that the view expressed in Para 6.2.1 of the Education Guide 2012 is erroneous.

A combined reading of the circular dated 10-2-2012 and the Education Guide would indicate that, while in the former, the view was that, the valuation of the construction activity undertaken by the Developer/Builder is to be based on the date of transfer/conveyance of the finished flats/apartments (pertaining to the Landowners) to the Landowners by the Developer/Builder, Para 6.2.1. of the Education Guide had taken the view that, such valuation is to be based on the value of the land transferred by the Landowners to the Developer/Builder as on the date of such transfer of land, which would obviously mean date of the joint development agreement in most cases. The Education Guide also stated that the point of taxation would be determined accordingly, which would have meant that the date of transfer of the land by the Landowners would be the date on which the service tax would have been leviable on the Developer/Builder, while the said Circular dated 10-2-2012 took the view that the point of taxation is the date on which the flats are transferred/conveyed to the Landowners by the Developer/Builder.

It is evident that the view expressed in the Education Guide is far more logical given the fact that, for purposes of levy of capital gains on the Landowners under the Income Tax Act, 1961, the date of transfer of the capital asset being land is taken to be the date of the joint development agreement, in most situations. The Education Guide had taken a similar view and there is nothing wrong about this, from a legal perspective. Of course, this would have meant that the service tax revenue to be generated in these cases would have been far lesser, as the valuation of land as on the date of the joint development agreement would have been much less, as compared to the valuation as on the date of the transfer of the flats by the Developer/Builder which would obviously fall at the end of the project. One is not able to see any logic in the latest salvo from the Board except that, it seems to be clearly aimed at increasing the revenue for the Government from joint development projects.

Be that as it may…..we need to bear in mind that, the circular dated 10-2-2012 was issued prior to the coming into force of the negative list based service tax law with effect from 1-7-2012 and one assumed that the said circular, having been so issued, would have to be assumed to have been rendered otiose. The Government has now given a fresh lease of life to this circular by reaffirming the views expressed therein, in its latest circular dated 20-1-2016.

The circular dated 10-2-2012 was issued prior to the introduction of the concept of continuous supply of services and based on this alone, it is to be considered that said circular is inoperative in law, not-withstanding the fact that, by and large, the concept of ‘continuous supply of services’ is applicable also to joint development projects. Moreover, the said circular also disregards the fact that joint development projects are Works contracts and are governed by Rule 2A of the Service Tax (Determination of Value) Rules, 2006 in terms of which, the valuation for purposes of service tax is to be based on the valuation applied for levy of sales tax/VAT. One rightfully assumed that, the said circular, having been issued prior to 1-7-2012 on which date the amended Rule 2A as aforesaid, was introduced, had become inoperative on the basis of the fundamental legal dictum that, in the event of a conflict, the rule would prevail over the circulars and notifications.

Further, the circular dated 10-2-2012 would become inoperative in the light of Section 67A of the Finance Act, 1994 which has been introduced with effect from 10-5-2012, in terms of which, the rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, or as applicable at the time when the taxable service has been provided or agreed to be provided.

It is crystal clear that the date when the service pursuant to the joint development is signed is the date where the services by the Developer/Builder is agreed to be provided, to the Landowners. This then is a clear case of the said circular dated 10-2-2012 clearly violating the provisions of Section 67A and does it require great brains to state that the Section would override the views expressed in a circular?

Taking this discussion further….. service tax on joint development projects can be levied, only if they are also subject to the levy of tax under the state Value Added Tax Act. It is to be emphasised that, the law related to the levy of VAT on joint development projects is yet to be attain finality, though, some States have amended their VAT Acts to provide that VAT shall be leviable on joint development projects. With particular reference to Karnataka, the question of levy of VAT on joint development projects is now before the Karnataka Appellate Tribunal, after the High Court has remanded some cases to the Tribunal. If it is held that VAT cannot be levied on joint development, service tax also cannot be levied for sure, as joint development arrangements are very much in the nature of works contracts.

In what would seem to be an exercise aimed with the sole objective of garnering more revenue, the Central Government, by issuing the latest instruction dated 20-1-2016 has succeeded in showing the Education Guide (which, many of us feel, to be a very well prepared guidance note) in rather poor light, which is quite unwarranted, especially, when the views expressed in Para 6.2.1 are well thought of and take into account, the developments related to the negative list based service tax law.

Of course…. there are a lot of practical issues involved in fixing point of taxation to be the date on which the flats are transferred/conveyed by the Developer/Builder to the Landowners, at the fag-end of the project. It would be impossible for the Developer/Builder to collect the service tax from the Landowners, who in turn, may have already sold or contemplated selling the flats acquired by them under the joint development agreement.

Before concluding…

As people involved in litigation practice, this circular comes as a huge opportunity, inasmuch as litigation arising out of this circular is bound to increase.

At a time when the Government is bending over backwards to simplify tax laws and thereby attract foreign investment, this circular comes as a rude shock reflecting the realities at the ground level, wherein, the mantra seems to be to garner tax revenues by any means, fair or unfair.

That it took almost four long years for our great Babus to identify the conflicting views expressed in the circular dated 20-2-2012 and the Education Guide dated 20-6-2012, is in no means, an under achievement. To expect that these Babus would be the same set of officers who will implement the GST law would be enough to send shivers down the spine of the Realty Sector.

In a masterly stroke, the new circular would seem to have demolished the importance of the Education Guide, which to many of us, is a document prepared after a lot of efforts and understanding of the negative list based taxation. To this extent, it seems to be a self-goal as the Industry would now dare to contest the issuance of any Show Cause Notice based on the Education Guide.

In our view, sooner of later the vires of the latest instruction would be put to test in a Writ. Till then, let the game of cat and mouse continue!

Budget may offer TDS relief to taxpayers : 29-01-2016


The government is considering rationalising tax deducted at source, according to recommendations made by the R V Easwar Committee.

Officials said the changes in tax deducted at source (TDS) rates and thresholds would not have a significant revenue impact. Revision of the tiny annual limits, which were long overdue, would, however, benefit small depositors and pensioners, they added. “For the Budget, we will be looking at recommendations that do not have large revenue implications. For the rest, we will have to do the math on the tax revenue foregone,” said a government official.
Read our full coverage on Union Budget 2016

The panel has suggested reducing the short-term capital gains tax on annual earning of less than Rs 5 lakh from trading of shares and not treating it as business income. This will have a significant revenue implication when the government is trying to lower the fiscal deficit to 3.5 per cent of the gross domestic product (GDP) in 2016-17 from the projected 3.9 per cent in 2015-16.

Budget may offer TDS relief to taxpayers

The committee has recommended reduction of the TDS rate for individuals and Hindu Undivided Families (HUFs) to five per cent from 10 per cent. For interest on securities, it has proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually and halving the tax rate to five per cent. For other interest earnings, the limit recommended is Rs 15,000, up from Rs 10,000 for bank deposits and Rs 5,000 for others.

“The thresholds are unfair to pensioners and widows, who have all their savings in fixed deposits. The average rate of tax has fallen, but these thresholds have not gone up. Why should they suffer tax at 10 per cent when the average rate of tax is somewhere at five per cent,” Easwar told Business Standard.

The 10-member panel has recommended a hike in the TDS threshold for payments in respect ofNSS (National Service Scheme) deposits to Rs 15,000 from Rs 2,500, and reducing rates from 20 per cent to five per cent. The panel has also suggested raising the TDS limit for payments to contractors from the current Rs 30,000 for a single transaction and Rs 75,000 annually to Rs 1 lakh annually. The TDS limit on rent income is proposed to be raised from Rs 1.8 lakh annually to Rs 2.4 lakh.

The committee has submitted only a draft report to Finance Minister Arun Jaitley and is likely to present the final one in a few days. Sources said the final report would not be drastically different from the draft. Jaitley said on Monday at an Income Tax Appellate Tribunal event the government was looking at the recommendations to come up with a neater tax regime to reduce litigation. The committee has said nearly 65 per cent of personal income tax collection in India was through TDS and the government should consider making its provisions less tedious.

The panel was set up by Jaitley in October to identify provisions and phrases in the Income Tax Act that led to litigation over interpretation. It was asked to suggest alternatives to ensure predictability in tax laws without substantially impacting the tax base or revenue collections.

Source : Business Standard

 

No. F. No. 390/Misc. /163/2010-JC Dated: 28-1-2016


D.O. Letter from Member(L&J) regarding withdrawal of appeals before HC/CESTAT – Dated 28-1-2016 – Central Excise

GOVERNMENT OF INDIA

MINISTRY OF FINANCE/ DEPARTMENT OF REVENUE

CENTRAL BOARD OF EXCISE & CUSTOMS

NORTH BLOCK, NEW DELHI-110001

Tel :+ 91-11-23092230 Fax : +91-11-23093106

D. O. F. No. 390/Misc. /163/2010-JC

28th January, 2016

Dear Chief Commissioner,

In order to reduce Government litigation at all judicial fora, Board has monetary increased monetary limits for filing appeals by the Department before CESTAT and High Court Vide instruction F.No. 390/Misc/163/2010-JC dated 17.12.2015 and also issued instructions to withdraw cases already filed below this limit, subject to the conditions laid down (instruction F. No. 1080/09/DLA/Misc/15/751 dated 21.12.2015).

All the Chief Commissioners were to initiate withdrawal from the various for a. The reports regarding number of such appeals to be withdrawn sent by few Chief Commissioners do not match with the total number of appeals below the increased monetary limits of their Zones, which are pending before the High Courts and CESTAT, as available in the database of the Board.

In view of above you are requested to re-examine each case file of such appeal and furnish report in respect of:

  1. Number of appeals fit for withdrawal separately for CESTAT, high Court etc.
  2. Number of withdrawal applications filed in these for a pursuant to (a) above
  3. Number of cases withdrawn, in terms of instruction dated 17.12.2015 and 21.12.2015

A zone-wise list pending in the CESTAT and High Court is enclosed with this letter.

Similar exercise is also required for the appeals which can be withdrawn on the basis of Supreme Court’s decision on identical matters in terms of Board’s instruction dated 18.12.2015 issued vide F.NO. 390/Misc./67/2014-JC.

Your first report in respect of your zone should reach me by return fax.

Yours Sincerely

(Ananya Ray

Ideas from people give their views on Centre’s schemes: Arun Jaitle : 28-01-2016


Information and Broadcasting minister Arun Jaitley today said that sourcing ideas from people provides the government an opportunity to understand their perspective on its major flagship programmes.

The senior minister said during an event to felicitate winners of contests held on social media by the I&B ministry as part of the 67th Republic Day celebrations.

The contests were hosted on Facebook, Twitter and a specially-designed webpage where ‘graffiti’ were invited from participants on various flagship programmes of the Centre.

For ‘graffiti’ wall, the themes were Start Up India, Stand Up India, Digital Empowerment, Entrepreneurs of Young India, Skilled India, Powerful India, Make In India, Financial Security to All and Housing For All.

For the Twitter contest, netizens’ responses were invited on with three hashtags — Vision of Team India, My Idea of India and R-Day Not Just a Holiday.

Regarding the poster-making contest on Facebook, participants were invited to send posters on themes like – Give It Up-LPG Subsidy, Per Drop More Crop and Save the Girl Child.

Minister of State for I&B Rajyavardhan Rathore and Secretary Sunil Arora were also present during the event.

Source : The Economic Times

200 SEZs likely to be exempt from 18.5% MAT : 28-01-2016


Enterprises operating from over 200 Special Economic Zones (SEZs) in the country are likely to be exempted from the minimum alternative tax (MAT) of 18.5 per cent on their book profits. The Union commerce ministry is understood to have made a strong case for removing MAT on SEZ units on the ground that giving this tax benefit would revive domestic manufacturing and provide the much-needed boost to exports, declining in each of the last 13 months.

GROWTH STORY OF SEZS
1965: Asia’s first export processing zone set up in Kandla, Gujarat
Apr 2000: Special Economic Zones (SEZs) policy announced
Feb 2006: Special Economic Zones Act, 2005, comes into force
Apr 2012: MAT imposed at 18.5% as well as dividend distribution tax (June 2011) on 10% book profits of developers and units located inside SEZ

In addition, the commerce ministry has also put in place an effective monitoring mechanism that is closely looking at what remedial measures can be taken to promote exports in some of India’s key markets. The free trade agreements (FTAs) are going to be examined from that perspective, as and when they come up for review.

200 SEZs likely to be exempt from 18.5% MAT Meanwhile, an attempt is being made to use India’s services exports strength and build that into its negotiations for agreements for merchandise trade. Simultaneously, an effort is being made to strengthen the legal framework for the plantation industry, so that this sector can also play a more useful role in exports and in domestic markets.

On the question of MAT, the commerce ministry has had detailed discussions with the finance ministry. Expectations of the government removing MAT on SEZ units are high, even though the finance ministry is still debating the decision’s implications of revenue loss for a government that is struggling hard to adhere to its promised fiscal deficit of 3.5 per cent of gross domestic product for 2016-17.

In the current financial year, the fiscal deficit has to be kept within 3.9 per cent of GDP, but next year the challenges of an increased expenditure burden on account of the recommendations of the Seventh Central Pay Commission are going to be more difficult.

According to official estimates, the corporation tax revenues foregone on account of the SEZ units in 2014-15 were estimated at Rs 18,394 crore. This revenue loss would have been more if the government had not levied MAT on these units. MAT was levied with effect from April 2011 on SEZ units. Therefore, the size of the potential revenue loss on account of removing MAT on SEZ units is what is causing a dilemma in the finance ministry.

The larger implication of removing MAT on SEZ units would be that the government’s earlier plan of phasing out corporation tax exemptions on SEZ units from 2017-18 would need to be reviewed. If MAT is to be removed from 2016-17, as is expected in the commerce ministry, then there would be no logic of phasing out corporation tax exemptions for them from 2017-18.

FACTFILE
Out of 347 SEZs which have received all requisite clearance certificates and been notified as of November 2015, only 204 are currently operational
Comptroller and Auditor General, in its December 2014 report, said out of 45,635.63 hectares notified for the development of SEZs, actual operations took place only in 28,488.49 hectares, or 62% of the notified land
Exports from SEZs declined to Rs 4.63 lakh crore in 2014-15, from Rs 4.94 lakh crore in 2013-14
Nearly Rs 3.63 lakh crore investments in SEZs currently, with Rs 1.5 lakh crore additional proposed investment
Total employment: 1.54 million

The latest move to consider removal of MAT on SEZ units follows a detailed representation made by SEZ companies to the commerce ministry last month. It was argued that the 204-odd SEZs have an estimated 4,122 operating units, engaged in exports of Rs 4.6 lakh crore, which accounted for almost a fifth of India’s total exports in 2014-15. With total investments estimated at Rs 3.63 lakh crore in these SEZ units, they employ around 1.5 million workers.

Those arguing in favour of abolishing MAT on SEZ units point out that the move would also help counter the steady rise in imports of a large number of items from various developing countries and China, which have begun flooding the Indian markets with their products in view of a downturn in international trade. The removal of MAT is being justified not only for giving a boost to the government’s Make In India programme, but also for keeping a check on imports of a large number of items.

Source : Business Standard

Simpler tax regime likely in Budget : 27-01-2016


Finance Minister Arun Jaitley on Monday hinted that some tax change recommendations of the committees headed by Parthasarathi Shome and R V Easwar might be incorporated in the coming Union Budget proposals.

“The law must be simple. Then, even if there are a large number of assessees, then chances of litigation are at a minimum. Since we amend the Finance Act every year through the Income Tax Act, the Act itself has become very complicated. There is a group under (retired) Justice Easwar which is looking into cleaning up the Act…The Shome committee report has also given many recommendations, which we are at an advanced stage of looking into. It has suggested many reforms in the tax administration itself,” Jaitley said, addressing the platinum jubilee celebrations here of the Income Tax Appellate Tribunal.
Read our full coverage on Union Budget 2016

PANELS’ SUGGESTIONS
Parthasarathi Shome
Widening the use of the permanent account number
Abolition of the post of revenue secretary
Revamp of the dispute resolution mechanism
Spending a tenth of the tax department’s budget to improve taxpayer service
R V Easwar
A friendlier tax regime and measures to ease litigation
Reduction in the tax deducted at source on interest rates and post office deposits
Raising the threshold limits for the levies and rationalising of capital gains tax

The Easwar panel was asked to come up with a clear and neater tax regime, to reduce litigation. The minister said the government would simplify tax laws to this end.

Shome headed the Tax Administration Reform Commission (TARC), which gave four reports. It has made several recommendations to make the tax administration payer-friendly and accountable. The proposals include widening the use of the permanent account number, abolition of the post of revenue secretary, a complete revamp of the dispute resolution mechanism and spending a tenth of the tax department’s budget to improve taxpayer service.

TARC also recommended a tax council to develop a common tax policy and legislation for both direct and indirect taxes, and merit-based promotions of officials. It also suggested merger of the Central Board of Direct Taxes and Central Board of Excise and Customs.

The Easwar committee gave its first draft set of proposals last week, also calling for a friendlier tax regime and measures to ease litigation. It recommended reduction in the tax deducted at source on interest rates and post office deposits, raising the threshold limits for the levies and rationalising of capital gains tax.

The panel said nearly 65 percent of the personal income tax collected in India was through TDS, whose provisions need to be made less “tedious” and more tax-friendly.

The committee proposed raising the threshold for TDS to Rs 15,000 from Rs 2,500 annually, and reducing the tax rate to five per cent for interest on securities from the present 10 per cent. It also recommended raising the threshold limit to Rs 15,000 from the present Rs 10,000 for bank deposits and Rs 5,000 for others.

Source : Business Standard

No. 01/2016 Dated: 12-1-2016


Frequently Asked Questions (FAQs) with regard to Corporate Social Responsibility under section 135 of the Companies Act, 2013 – Dated 12-1-2016 – Companies Law

General Circular No. 01/2016

No. 05/19/2015- CSR

Government of India

Ministry of Corporate Affairs

5th Floor, ‘A’ Wing,

Shastri Bhawan, Dr. R. P. Marg

New Delhi – 110 001

Dated: 12th January, 2016

To,

All Regional Director,

All Registrar of Companies,

All Stakeholders

Subject: – Frequently Asked Questions (FAQs) with regard to Corporate Social Responsibility under section 135 of the Companies Act, 2013.

Sir,

Section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies CSR Policy Rules, 2014 read with General Circular dated 18.06.2014 issued by the Ministry of Corporate Affairs, provide the broad contour within which eligible Companies are required to formulate their CSR policies including activities to be undertaken and implement the same in the right earnest. While complying with the Corporate Social Responsibility (CSR) provisions of the Act, Board of the eligible companies are empowered to appraise and approve their CSR policy including CSR projects or programmes or activities to be undertaken. In this connection, Ministry has been receiving several queries and references seeking further clarifications on various issues relating to CSR provision of the Act.

2. In continuation to this Ministry’s General Circular dated 18th June, 2014 and 17th September, 2014, a set of FAQs along with response of the Ministry is provided*for facilitating effective implementation of CSR           :

FREQUENTLY ASKED QUESTIONS ON CORPORATE SOCIAL RESPOSIBITITIES

SI. NO.

FAQS

1.

WHETHER CSR PROVISION OF THE COMPANIES ACT, 2013 IS APPLICABLE TO ALL COMPANIES?

 

CSR provisions of the Companies Act 2013 is applicable to every company registered under the Companies Act 2013 and any other previous companies law having

Net worth of rupees five hundred crore or more, or

Turnover of rupees one thousand crore or more or

A net profit of rupees five crore or more during any financial year

2.

WHAT IS MEANING OF ‘ANY FINANCIAL YEAR’ MENTIONED ABOVE?

 

“Any Financial Year” referred under Sub-section (1) of Section 135 of the Act read with Rule 3(2) of Companies CSR Rule, 2014 implies any of the three preceding financial years (referGeneral Circular No. 21/2014, dated: 18.06.2014)

3.

WHETHER CSR EXPENDITURE OF A COMPANY CAN BE CLAIMED AS A BUSINESS EXPENDITURE?

 

The amount spent by a company towards CSR cannot be claimed as business expenditure. The Finance Act, 2014 provides that any expenditure incurred by an assessee on the activities relating to Corporate Social Responsibility referred to in section 135 of theCompanies Act, 2013 shall not  be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.

4.

WHETHER THE ‘AVERAGE NET PROFIT’ CRITERIA FOR SECTION 135(5) IS NET PROFIT BEFORE TAX OR NET PROFIT AFTER TAX?

 

Computation of net profit for section 135 is as per section 198 of the Companies Act, 2013which is primarily PROFIT BEFORE TAX (PBT).

5.

CAN THE CSR EXPENDITURE BE SPENT ON THE ACTIVITIES BEYOND SCHEDULE VII?

 

General Circular No. 21/2014 dated June 18, 2014 of MCA has clarified that the statutory provision and provisions of CSR Rules, 2014, is to ensure that activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act, 2013. The entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule. The items enlisted in theSchedule VII of the Act, are broad-based and are intended to cover a wide range of activities. The General Circular also provides an illustrative list of activities that can be covered under CSR. In a similar way many more can be covered. It is for the Board of the company to take a call on this.

6.

WHAT TAX BENEFITS CAN BE AVAILED UNDER CSR?

 

No specific tax exemptions have been extended to CSR expenditure per se. The finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure. While no specific tax exemption has been extended to expenditure incurred on CSR, spending on several activities like contributions to Prime Minister’s Relief Fund, Scientific Research, Rural development projects, skill development projects, agricultural extension projects, etc. which find place in Schedule VII, already enjoy exemptions under different sections of the Income Tax Act, 1961.

7.

WHICH ACTIVITIES WOULD NOT QUALIFY AS CSR?

 

The CSR projects or programs or activities that benefit only the employees of the company and their families.

One- off events such as marathons/ awards/ charitable contribution/ advertisement/ sponsorships of TV programmes etc.

Expenses incurred by companies for the fulfilment of any other Act/ Statue of regulations (such as Labour Laws, Land Acquisition Act, 2013, Apprentice Act, 2013, Apprentice Act, 1961 etc.)

Contribution of any amount directly or indirectly to any political party.

Activities undertaken by the company in pursuance of its normal course of business.

The project or programmes or activities undertaken outside India.

8.

WHETHER A HOLDING OR SUBSIDIARY OF A COMPANY WHICH FULFILS THE CRITERIA UNDER SECTION 135(1) HAS TO COMPLY WITH SECTION 135, EVEN IF THE HOLDING AND SUBSIDIARY ITSELF DOES NOT FULFILL THE CRITERIA.

 

Holding or subsidiary of a company does not have to comply with section 135(1) unless the holding or subsidiary itself fulfills the criteria.

9.

Whether provisions of CSR are applicable on Section 8 Company, if it fulfills the criteria of section 135(1) of the Act.

 

Section 135 of the Act reads “Every company……”, i.e. no specific exemption is given tosection 8 companies with regard to applicability of section 135, hence section 8 companies are required to follow CSR provisions.

10.

CAN CONTRIBUTION OF MONEY TO A TRUST/ SOCIETY/ SECTION 8 COMPANIES BY A COMPANY BE TREATED AS CSR EXPENDITURE OF THE COMPANY?

 

General Circular No 21/2014 of MCA dated June 18, 2014 clarifies that contribution to Corpus of a Trust/ Society/ Section 8 companies etc. will qualify as CSR expenditure as long as:

The trust/ Society/ Section 8 company etc. is created exclusively for undertaking CSR activities or

Where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VII of the Act.

11.

WHETHER DISPLAY OF CSR POLICY OF A COMPANY ON WEBSITE OF THE COMPANY IS MANDATORY OR NOT?

 

As per section 135(4) the Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company’s website, if any (refer Rule 8 & 9 of CSR policy, Rules 2014).

12.

WHETHER REPORTING OF CSR IS MANDATORY IN BOARD’S REPORT?

 

The Board’s Report of a company qualifying under section 135(1) pertaining to a financial year commencing on or after the 1st day of April, 2014 shall include an annual report on CSR containing particulars specified in Annexure. (refer Rule 9 of CSR policy, Rules 2014).

13.

WHETHER IT IS MANDATORY FOR FOREIGN COMPANY TO GIVE REPORT ON CSR ACTIVITY?

 

In case of a foreign company, the balance sheet filed under sub-clause (b) of sub-section (1) of section 381 shall contain an Annexure regarding report on CSR.

14.

WHETHER CONTRIBUTION TOWARDS DISASTER RELIEF QUALIFIES AS CSR OR NOT?

 

(May please refer point no. 7 to the annexure to General Circular dated 18.06.2014 issued by Ministry of Corporate Affairs).

15.

WHETHER CONTRIBUTION IN KIND CAN BE MONETIZED TO BE SHOWN AS CSR EXPENDITURE?

 

Section 135 prescribes “….. shall ensure that company spends…..”. The company has to spend the amount.

16.

IF A COMPANY SPENDS IN EXCESS OF 2% OF ITS AVERAGE NET PROFITS OF THREE PRECEDING YEARS ON CSR IN A PARTICULAR YEAR, CAN THE EXCESS AMOUNT SPENT BE CARRIED FORWARD TO THE NEXT YEAR AND BE OFFSET AGAINST THE REQUIRED 2% CSR EXPENDITURE OF THE NEXT YEAR?

 

Any excess amount spent (i.e., more than 2% as specified in Section 135) cannot be carried forward to the subsequent years and adjusted against that year’s CSR expenditure.

17.

CAN THE UNSPENT AMOUNT FROM OUT OF THE MINIMUM REQUIRED CSR EXPENDITURE BE CARRIED FORWARD TO THE NEXT YEAR?

 

The Board is free to decide whether any unspent amount from out of the minimum required CSR expenditure is to be carried forward to the next year. However, the carried forward amount should be over and above the next year’s CSR allocation equivalent to at least 2% of the average net profit of the company of the immediately preceding three years.

18.

WHAT IS THE ROLE OF GOVERNMENT IN MONITORING IMPLEMENTATION OF CSR BY COMPANIES UNDER THE PROVISION OF THE COMPANIES ACT, 2013?

 

The main thrust and spirit of law is not to monitor but to generate conductive environment for enabling the corporates to conduct themselves in a socially responsible manner, while contributing towards human development goals of the country.

The existing legal provisions like mandatory disclosures, accountability of the CSR committee and the Board, provisions for audit of the accounts of the company etc., provide sufficient safeguards in this regard. Government has no role to play in monitoring implementation of CSR by companies.

19.

WHETHER GOVERNMENT IS PROPOSING TO ESTABLISH ANY MECHANISM FOR THIRD PARTIES TO MONITOR THE QUALITY AND EFFICACY OF CSR EXPENDITURE AS WELL AS TO HAVE AN IMPACT ASSESSMENT OF CSR BY COMPANIES?

 

Government has no role to play in engaging external experts for monitoring the quality and efficacy of CSR expenditure of companies. Boards / CSR Committees are fully competent to engage third parties to have an impact assessment of its CSR programme to validate compliance of the CSR provisions of the law.

20.

CAN CSR FUNDS BE UTILIZED TO FUND GOVERNMENT SCHEME?

 

The objective of this provision is indeed to involve the corporates in discharging their social responsibility with their innovative ideas and management skills and with greater efficiency and better outcomes. Therefore, CSR should not be interpreted as a source of financing the resource gaps in Government Scheme. Use of Corporate innovations and management skills in the delivery of ‘public goods’ is at the core of CSR implementation by the companies. In- principle, CSR fund of companies should not be used as a source of funding Government Schemes. CSR projects should have a larger multiplier effect than that under the Government Schemes.

However, under CSR provision of the Act and rules made thereunder, the Board of the eligible company is competent to take decision on supplementing any Government Scheme provided the Scheme permits corporates participation and all provisions of Section 135 of the Act and rules thereunder are compiled by the company.

21.

WHO IS THE APPROPRIATE AUTHORITY FOR APPROVING AND IMPLEMENTATION OF THE CSR PROGRAMMES/PROJECTS OF A COMPANY? WHAT IS GOVERNMENT’S ROLE IN THIS REGARD?

 

Government has no role to play in this regard. Section 135 of the Act, Schedule VII andCompanies CSR Policy Rules, 2014 read with General Circular dated 18.06.2014 issued by the Ministry of Corporate Affairs, provide the broad contour within which eligible companies are required to formulate their CSR policies including activities to be undertaken and implement the same in the right earnest. Therefore, all CSR programmes/ projects should be approved by the Boards on the recommendations of their CSR Committees. Changes, if any, in the programme / project should also be undertaken only with the approval of the Committee / Board.

22.

HOW CAN COMPANIES WITH SMALL CSR FUNDS TAKE UP CSR ACTIVITIES IN A PROJECT/ PROGRAMME MODE?

 

A well designed CSR project or programme can be managed with even small fund. Further, there is a provision in the CSR policy Rules, 2014 that such companies can combine their CSR programs with other similar companies by way of pooling their CSR resources. (referrule 4 in Companies (CSR Policy) Rules, 2014.

23.

WHETHER INVOLVEMENT OF EMPLOYEES OF THE COMPANY IN CSR PROJECT/ PROGRAMME OF A COMPANY CAN BE MONETIZED AND ACCOUNTED FOR UNDER THE HEAD OF ‘CSR EXPENDITURE’?

 

Contribution and involvement of employees in CSR activities of the company will no doubt generate interest/ pride in CSR work and promote transformation from Corporate Social Responsibility (CSR) as an obligation to Socially Responsible Corporate (SRC) in all aspects of their functioning. Companies therefore, should be encouraged to involve their employees in CSR activities. However monetization of pro bono services of employees would not be counted towards CSR expenditure.

3. This issues with the approval of Competent Authority.

Yours faithfully, 

(Seema Rath)

Deputy Director (CSR-Cell)

Tel: -011-23384657

 

GST: Govt yet to appoint empowered panel head : 25-01-2016


Finance minister Arun Jaitley is yet to name a chairman for the Empowered Group of State Finance Ministers (ECSFM) on the proposed national goods and services tax (GST), even two months after Kerala finance minister K M Mani stepped down.

This is despite the Union government also making fresh efforts to enable the tax’s rollout, including pushing for passage of constitutional amendment Bill in the Rajya Sabha session starting next month.

The Lok Sabha has already passed the Bill, stalled in the other House for want of majority support. After the passage, a Bill of the GST itself would come before Parliament and all state legislatures. Then, rules will be framed. The absence of a ECSFM chairman has derailed its meetings, needed to discuss key issues on the proposed laws and rules.

DEADLOCK
The Lok Sabha has already passed the Bill, but stalled in the other House for want of majority support

Since K M Mani resigned as finance minister of Kerala over corruption charges in November, only one meeting of the committee has taken place

A committee headed by the government’s chief economic advisor, Arvind Subramanian, recommended a standard GST rate of 17-18 per cent

It had also suggested a lower rate of 12 per cent for certain commodities and a ‘sin tax’ of 40 per cent for items like aerated drinks and tobacco

“There has been no communication from the finance minister. He has probably been keeping busy on account of budget preparations. We are still waiting,” said a member.

After Mani resigned as finance minister of Kerala over corruption charges in November, only one meeting of the committee has taken place. In November, Delhi finance minister Manish Sisodia was selected to chair a meeting for a day. It had decided on a sub-panel to decide on the issue of a threshold, as states were divided on whether GST should kick in from Rs 10 lakh or Rs 25 lakh of annual turnover.

The next round was to take place in December but did not happen. The committee was to draft a GST law and business processes for payments, refunds and returns filing.

The constitution amendment Bill could not be cleared in the previous session of Parliament, too. The Congress party stood stern on its demand to fix the proposed rates in the legislation itself. The Centre has staunchly opposed this, saying this would limit flexibility of the proposed GST Council to change these.

In between, a committee headed by the government’s chief economic advisor, Arvind Subramanian, recommended a standard GST rate of 17-18 per cent, with a lower rate of 12 per cent for certain commodities and a ‘sin tax’ of 40 per cent for items like aerated drinks and tobacco.

In the proposed GST Council, the Centre is to have a third of the members and states together the other two-third. The consensus so far is that a decision requires a three-fourth majority.

There were some signs of the Congress diluting its position over fixing the GST rate in the constitution amendment Bill. At the World Economic Forum in Davos, party leader Kamal Nath had said, “I hope they (the government) do say that I accept the cap but let’s not have it in the constitution.”

Jaitley had noted the GST was originally a Congress initiative. By insisting on inclusion of GST rates in the constitution amendment bill, it is demanding something it hadn’t proposed when the party was in power.

GST was originally proposed to be implemented from April 2010. Several deadlines were missed due to differences between Centre and states. The current deadline is April 2016, also set to be missed.

Source : Business Standard

Budget may ease rules for offshore fund managers moving to India : 25-01-2016


In a move to woo offshore fund managers to locate in India, the Union Budget for 2016-17 is likely to relax conditions for them to avail of tax exemptions.

Budget 2015 had announced some exemptions by amending the permanent establishment (PE) norms. The rules were changed to the extent that mere presence of a fund manager in India does not constitute PE of the offshore fund. This implies these fund managers are exempt from corporate taxation in India.

RELAXED RULES
Budget for 2015-16 had amended PE conditions to provide corporate tax exemption to foreign fund managers if they moved to India
Govt had hoped many fund managers would shift their base to India to avail of tax relief
However, fund managers feel the conditions for availing of exemptions are rather tough
Budget for 2016-17 is likely to ease some of these rules

“The present taxation structure has an in-built incentive for fund managers to operate from offshore locations. To encourage such offshore fund managers to relocate to India, I propose to modify the PE norms to the effect that mere presence of a fund manager in India will not constitute PE of the offshore funds resulting in adverse tax consequences,” Finance Minister Arun Jaitley had said in his Budget speech last year.

However, these efforts have so far not been able to impress offshore fund managers like Citi, Morgan Stanley, JPMorgan and others, as conditions for availing of the tax exemptions are rather stiff.

There are altogether 13 conditions, most contained in the Section 9 (A) of the Finance Act, 2015. One of those says that the fund has to have at least twenty-five members at the foreign institutional investor (FII) level. Most of these fund managers do not meet this condition. Besides, there are funds-of-funds that invest through one entity. These cannot be treated as just one investor.

In fact, the Securities and Exchange Board of India (Sebi) mandates that one member is enough for non-broad-based funds like pension funds, sovereign funds, university funds and insurance funds.

Consultants of offshore fund managers recently met finance ministry officials in this regard and asked them to have parity between Sebi rules and rules for offshore fund managers in Section 9 (A) of the Finance Act, 2015.

The finance ministry sources said they were considering the request and might incorporate this in the Budget.

The other condition, however, is that the remuneration paid by the fund to an eligible fund manager in respect of fund-management activity undertaken on its behalf must not be less than the arm’s-length price of such activity.

Now, deciding an arm’s-length price is subjective, say consultants. In transfer pricing, an arm’s length means the parties in a transaction are independent and on an equal footing. For instance, the goods supplied by a parent to Indian subsidiaries are considered an equal to the same goods supplied to others.

Fund managers say this condition should be diluted as it is anyway dealt in transfer-pricing disputes. “Since transfer-pricing disputes are common in India, and transfer pricing in any case is not an exact science, the arm’s-length condition should be removed, so that transfer-pricing disputes do not make a fund ineligible for availing of the tax exemption,” says Rajesh Gandhi, partner (tax), Deloitte Haskins & Sells. There is also a condition that a member of a fund cannot have any participation interest exceeding 10 per cent in the fund. Fund managers find this condition unrealistic.

The Finance Act of 2015 provides ffshore fund managers moving to India a relief from corporate taxation, the fund managers demand a relief from personal income tax for three years, as is given to start-ups. Their contention is that personal income tax rates in the highest slab (30 per cent) in India are double those in Singapore and Hong Kong; that is why they opt for those Southeast Asian countries. Besides offshore fund managers, the government is also looking at India-based specific fund managers which could be established by non-resident Indians.

Source : PTI

Notification No. : F. No. A-42011/03/2016-Ad.II Dated: 22-1-2016


Central Government establishes a Central Registration Centre (CRC) having territorial jurisdiction all over India – F. No. A-42011/03/2016-Ad.II – Dated 22-1-2016 – Companies Law

GOVERNMENT OF INDIA

MINISTRY OF CORPORATE  AFFAIRS

Notification

New Delhi, the 22 January 2016

S.O. 218 (E) -  In exercise of the powers conferred by sub-sections (1) and (2) of section 396 of the Companies Act, 2013 (18 of 2013) (herein after referred to as the Act), the Central Government hereby establishes a Central Registration Centre (CRC) having territorial jurisdiction all over India, for discharging or carrying out the function of processing and disposal of applications for reservation of names under the provisions of the said Act.

2.    The CRC shall function under the administrative control of Registrar of Companies, Delhi (ROC Delhi), who shall act as the Registrar of the CRC until a separate Registrar is appointed to the CRC. The CRC shall process applications for reservation of name i.e., e-Form No. INC-1 filed along with the prescribed fee as provided in theCompanies (Registration of Offices and Fees) Rules, 2014.

3.    Processing and approval of name or names proposed in e-Form No.INC-29 shall continue to be done by the respective Registrar of Companies having jurisdiction over incorporation of companies under the Companies Act, 2013 as per the provisions of the Act and the rules made thereunder.

4.   The CRC shall be located at Indian Institute of Corporate Affairs (IICA), Plot No. 6, 7, 8, Sector 5, IMT Manesar , District Gurgaon (Haryana), Pin Code- 122050.

5. This notification shall come into force from 26th  January, 2016.

[F. No. A-42011/03/2016-Ad.II]

(Manoj Kumar)

Joint Secretary to the Govt. of India

Notification No. : 4/2016 Dated: 22-1-2016


CORRIGENDUM – Notification No. S.O. 3313 (E), dated the 8th December, 2015 – 4/2016 – Dated 22-1-2016 – Income Tax

MINISTRY OF FINANCE

(Deaprtment of Revenue)

(CENTRAL BOARD OF DIRECT TEXES)

CORRIGENDUM

New Delhi, the 22nd January, 2016

S.O. 223(E).- In the notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) number S.O. 3313 (E), dated the 8th December, 2015, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated the 8th December, 2015, in the English version, in line 5, for “9th December, 2015” read “8th December, 2015”.

[Notification No. 4/2016/F. No.178/21/2014-ITA-I]

DEEPSHIKHA SHARMA, Director

Notification No. : F. No. 1/13/2013 CL-V-part-II Dated: 22-1-2016


Companies (Incorporation) Amendment Rules, 2016 – F. No. 1/13/2013 CL-V-part-II – Dated 22-1-2016 – Companies Law

GOVERNMENT OF INDIA

MINISTRY OF CORPORATE AFFAIRS

Notification

New Delhi, the 22nd January, 2016

G.S.R.  (E).-In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Incorporation) Rules, 2014, namely:-

1. Short title and commencement.-

(1) These rules may be called the Companies (Incorporation) Amendment Rules, 2016.

(2) They shall come into force from 26th day of January, 2016.

2. In the Companies (Incorporation) Rules, 2014 (herein after referred to as the principal rules), in rule 8,-

(i) in sub-rule (2)

(a) sub-clause (ii) of clause (b) shall be omitted;

(b) sub-clause (x) of clause (b) shall be omitted; and

(c) sub-clause (xvii) of clause (b) shall be omitted.

(ii) sub-rule (3) shall be omitted.

(iii) sub-rule (4) shall be omitted.

3. In the principal rules, for Rule 9 the following shall be substituted namely:

“9. Reservation of name – An application for the reservation of a name shall be made in Form No. INC.1  along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 which may be approved or rejected, as the case may be, by the Registrar, Central Registration Centre.”

(4) In the principal rules, in rule 36, in sub-rule(12),-

(i) after sub-clause (b), the following shall be inserted.-

‘(ba) After the resubmission of the documents and on completion of second opportunity, if the registrar still finds that the documents are defective or incomplete, he shall give third opportunity  to remove such defects or deficiencies;’

Provided that the total period for re-submission of documents shall not exceed a total period of thirty days.

(ii) in sub-clause (c), for the words ‘two opportunities’, the words ‘three opportunities’ shall be substituted.

(5) In the principal rules, for the existing Form No.INC- 1, the following form no. INC-1 shall be substituted, namely:-

Cabinet reshuffle likely to push Jaitley out of finance: Reuters : 22-01-2016


Finance Minister Arun Jaitley may soon be moved out from the crucial ministry, Reuters reported Friday. Power and coal minister Piyush Goyal is likely to replace Jaitley who may be moved to the defence ministry. The reshuffle may take place post the annual budget on February 29, acccording to the Reuters report. 

This will be the first major reshuffle for the Narendra Modi-led NDA government since they came to power in May 2014. While the economy has been stable, the BJP-led alliance has faced widespread criticism for failing to get key economic bills like the Goods and Services Tax (GST) cleared in Parliament due to non-cooperation from a Congress-led Opposition. 

Reuters added that Jaitley’s exit from the ministry is a reflection of the belief in the government that they need a fresh face to push key reforms to kickstart the economy. India’s estimated GDP for FY15 has been reduced to 7.4% from earlier projections of 8% or more, thanks largely to stagnant private investments and a global decline in growth, led by a slowdown in China. 

An investment banker-turned-politician, Goyal is likely to be rewarded for tackling chronic power shortages and backing renewable sources of energy, two issues that are important for PM Narendra Modi’s pre-election promise to provide electricity to all households in the country. 

 
Source : PTI

Notification No. : 03/2016 Dated: 22-1-2016


Seeks to amend Notifications No.56/2002-CE & No.57/2002-CE both dated 14.11.2002 so as to insert a sunset clause of 31.03.2016 and to deny the benefit of the exemption to goods on which certain specified processes have been undertaken – 03/2016 – Dated 22-1-2016 – Central Excise – Tariff

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE)

Notification No. 03/2016-Central Excise

New Delhi, the 22nd  January, 2016.

G.S.R. 103 (E).- In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notifications of the Government of India in the Ministry of Finance (Department of Revenue) specified in column (2) of the Table below, in the manner and to the extent specified in the corresponding entry in column (3) of the said Table, namely:-

Table

S.No.

Notification No. and date

Amendments

(1)

(2)

(3)

1. 56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated 14th  November, 2002]. In the said notification,-
(a)  in paragraph 3,
(i)  in clause (a), after the figures, letters and words, “14th day of June, 2002″, the words, figures and letters “but not later than the 31st day of March, 2016″ shall be inserted;
(ii)  in sub- clause (i) of clause (b), after the figures, letters and words, “14th day of June, 2002″, the words, figures and letters, “but not later than the 31st day of March, 2016″ shall be inserted;
(iii) in sub- clause (ii) of clause (b), after the figures, letters and words, “14th day of June, 2002″, the words, figures and letters, “but not later than the 31st day of March, 2016″ shall be inserted;
(b) after paragraph (4), the following paragraph shall be inserted, namely:-
“5. The exemption contained in this notification shall not apply to such goods which have been subjected to only one or more of the following processes, namely, preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labeling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the State of Jammu and Kashmir.”.
2. 57/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 765(E), dated 14th  November, 2002]. In the said notification,-
(a)  in paragraph 3,-
(i)   in clause (a), after the figures, letters and words, “14th day of June, 2002″, the words, figures and letters “but not later than the 31st day of March, 2016″ shall be inserted;
(ii)  in sub-clause (i) of clause (b), after the figures, letters and words, “14th day of June, 2002″, the words, figures and letters, “but not later than the 31st day of March, 2016″ shall be inserted;
(iii) in sub-clause (ii) of clause (b), after the figures, letters and words, “14th day of June, 2002″, the words, figures and letters, “but not later than the 31st day of March, 2016″ shall be inserted and
(b) after paragraph (4), the following paragraph shall be inserted, namely:-
“5. The exemption contained in this notification shall not apply to such goods which have been subjected to only one or more of the following processes, namely, preservation during storage, cleaning operations, packing or repacking of such goods in a unit container or labeling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the State of Jammu and Kashmir.”.

[F. No. 332/09/2013-TRU]

(Mohit Tewari)

Under Secretary to the Government of India

Note:- (1) The principal notification No. 56/2002-Central Excise, dated the 14th of November, 2002, was published in the Gazette of India, Extraordinary, vide number G.S.R. 764(E), dated the 14th of November, 2002 and last amended by notification No. 52/2008-Central Excise, dated the 3rd October, 2008, published vide number G.S.R. 711(E), dated the 3rd October, 2008.

(2) The principal notification No. 57/2002-Central Excise, dated the 14th of November, 2002, was published in the Gazette of India, Extraordinary, vide number G.S.R. 765(E), dated the 14th of November, 2002 and last amended by notification No. 53/2008-Central Excise, dated the 3rd October, 2008, published vide number G.S.R. 712(E), dated the 3rd October, 2008.

Notification No. : 7(R)/2015-RB Dated: 21-1-2016


Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015 – 7(R)/2015-RB – Dated 21-1-2016 – Foreign Exchange Management

RESERVE BANK OF INDIA

(Foreign Exchange Department)

CENTRAL OFFICE

NOTIFICATION No. FEMA 7(R)/2015-RB

Mumbai , the 21st January , 2016

Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015

G.S.R. 95(E).-In exercise of the powers conferred by clause (h) of sub-section (3) of Section 6, sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in supersession of Notification No. FEMA 7/2000-RB dated May 3, 2000, as amended from time to time, the Reserve Bank hereby makes the following regulations relating to acquisition and transfer of immovable property outside India, namely :-

1. Short title and commencement:-

(i) These regulations may be called the Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations, 2015.

(ii) They shall come into force from the date of their publication in the Official Gazette.

2. Definitions:-

In these regulations, unless the context requires otherwise, -

(i) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

(ii) The words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

3. Restriction on acquisition or transfer of immovable property outside India:-

Save as otherwise provided in the Act or in these regulations, no person resident in India shall acquire or transfer any immovable property situated outside India without general or special permission of the Reserve Bank.

4. Exemptions:-

Nothing contained in these regulations shall apply to the property -

(a) held by a person resident in India who is a national of a foreign state;

(b) acquired by a person resident in India on or before 8th July 1947 and continued to be held by him with the permission of the Reserve Bank.

5. Acquisition and Transfer of Immovable Property outside India:-

(1) A person resident in India may acquire immovable property outside India, -

(a) by way of gift or inheritance from a person referred to in sub-section (4) of Section 6 of the Act, or referred to in clause (b) of regulation 4;

(b) by way of purchase out of foreign exchange held in Resident Foreign Currency (RFC) account maintained in accordance with the Foreign Exchange Management (Foreign Currency accounts by a person resident in India) Regulations, 2015;

(c) jointly with a relative who is a person resident outside India, provided there is no outflow of funds from India;

(2) A person resident in India may acquire immovable property outside India, by way of inheritance or gift from a person resident in India who has acquired such property in accordance with the foreign exchange provisions in force at the time of such acquisition.

(3) A company incorporated in India having overseas offices, may acquire immovable property outside India for its business and for residential purposes of its staff, in accordance with the direction issued by the Reserve Bank of India from time to time.

Explanation:

For the purposes of these regulations, ‘relative’ in relation to an individual means husband, wife, brother or sister or any lineal ascendant or descendant of that individual.

[F. No. 1/31/EM/2016]

B. P. KANUNGO, Principal Chief General Manager

Notification No. : 10(R)/2015-RB Dated: 21-1-2016


Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015 – 10(R)/2015-RB – Dated 21-1-2016 – Foreign Exchange Management

RESERVE BANK OF INDIA

(Foreign Exchange Department)

CENTRAL OFFICE

NOTIFICATION No. FEMA 10(R)/2015-RB

Mumbai, the 21st  January, 2016

Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015

G.S.R. 96(E).-In exercise of the powers conferred by Section 9 and clause (e) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in supersession of Notification No. FEMA 10/2000-RB dated May 3, 2000, as amended from time to time, the Reserve Bank of India makes the following regulations for opening, holding and maintaining of Foreign Currency Accounts and the limits up to which amounts can be held in such accounts by a person resident in India, namely:

1. Short title and commencement:-

i) These Regulations may be called the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015.

ii) They shall come into force from the date of their publication in the Official Gazette.

2. Definitions:-

In these Regulations, unless the context otherwise requires, -

i) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);

ii) ‘Authorised dealer’ means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Act;

iii) ‘Foreign Currency Account’ means an account held or maintained in currency other than the currency of India or Nepal or Bhutan;

iv) ‘Schedule’ means schedule to these Regulations;

v) the words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

3. Restriction on holding foreign currency account by a person resident in India:-

Save as otherwise provided in the Act or rules or regulations made there under, no person resident in India shall open or hold or maintain a foreign currency account:

Provided that a Foreign Currency Account held or maintained before the commencement of these Regulations by a person resident in India with special or general permission of the Reserve Bank, shall be deemed to be held or maintained under these Regulations:

Provided further that the Reserve Bank, may on an application made to it, permit a person resident in India to open or hold or maintain a Foreign Currency Account, subject to such terms and conditions as may be considered necessary.

4. Opening, holding and maintaining Foreign Currency Accounts in India

(A) Exchange Earners’ Foreign Currency Account:-

A person resident in India may open, hold and maintain with an authorised dealer in India, a Foreign Currency Account to be known as Exchange Earners’ Foreign Currency (EEFC) Account, subject to the terms and conditions of the Exchange Earners’ Foreign Currency Account Scheme specified in the Schedule I.

(B) Resident Foreign Currency Account:-

(1) A person resident in India may open, hold and maintain with an authorised dealer in India a Foreign Currency Account, to be known as a Resident Foreign Currency (RFC) Account, out of foreign exchange –

(a) received as pension or any other superannuation or other monetary benefits from his employer outside India; or

(b) realised on conversion of the assets referred to in sub-section (4) of section 6 of the Act, and repatriated to India; or

(c) received or acquired as gift or inheritance from a person referred to in sub-section (4) of section 6 of theAct; or

(d) referred to in clause (c) of section 9 of the Act, or acquired as gift or inheritance there from; or

(e) received as the proceeds of life insurance policy claims/maturity/surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority.

(2) The funds in a Resident Foreign Currency Account opened or held or maintained in terms of sub-regulation (1) shall be free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form, by whatever name called, outside India.

(3) Resident individuals are permitted to include resident relative(s) as joint holder(s) in their Resident Foreign Currency account on ‘former or survivor’ basis. However, such resident Indian relative joint account holder shall not be eligible to operate the account during the life time of the resident account holder.

Explanation – For the purpose of this sub-regulation, the expression ‘relative’ shall have the same meaning as assigned to it under section 2(77) of the Companies Act, 2013.

(C) Resident Foreign Currency (Domestic) Account

(1) A resident Individual may open, hold and maintain with an Authorised Dealer in India a foreign currency account, to be known as Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired in the form of currency notes, bank notes and travellers’ cheques as under:

(a) by way of payment for services not arising from any business in or anything done in India while on a visit to any place outside India; or

(b) from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; or

(c) by way of honorarium or gift while on a visit to any place outside India; or

(d) in the form of unspent amount of foreign exchange acquired by him from an authorised person for travel abroad; or

(e) as gift from a relative;

Explanation - For the purpose of this sub-regulation, the expression ‘relative’ shall have the same meaning as assigned to it under section 2(77) of the Companies Act, 2013.

(f) by way of earning through export of goods/ services, or as royalty, honorarium or by any other lawful means;

(g) representing the disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/ GDRs under the DR Scheme, 2014 approved by the Government of India.

(h) by way of earnings received as the proceeds of life insurance policy claims/ maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority

(2) Debits to the account shall be for payments towards a current account transaction in accordance with the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and towards a capital account transaction permissible under the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000.

(3) The account shall be maintained in the form of Current Account and shall not bear any interest.

(4) There shall be no ceiling on the balances in the account

(D) A Unit in a Special Economic Zone (SEZ)

A unit located in a Special Economic Zone may open hold and maintain a Foreign Currency Account with an authorized dealer in India provided that,

(a) all foreign exchange funds received by the unit in the Special Economic Zone (SEZ) are credited to such account,

(b) no foreign exchange purchased in India against rupees shall be credited to the account without prior permission from the Reserve Bank,

(c) the funds held in the account shall be used for bona fide trade transactions of the unit in the SEZ with the person resident in India or otherwise,

(d) the balances in the accounts shall be exempt from the restrictions imposed under Rule 5, except item 1(ii) of the Schedule III, of the Government of India Notification No.GSR.381(E) dated May 3, 2000, as amended from time to time.

Provided that the funds held in these accounts shall not be lent or made available in any manner to any person or entity resident in India not being a unit in Special Economic Zones.

(E) Diamond Dollar Accounts (DDAs)

An Authorized Dealer Category-I bank in India may allow firms and companies who comply with the eligibility criteria stipulated in the Foreign Trade Policy of Government of India, in force from time to time and the directions as may be issued by Reserve Bank of India, from time to time, to open, hold and maintain Diamond Dollar Accounts (DDAs) in India subject to the terms and conditions of the DDA Scheme specified in Schedule II.

(F) Exporters

A person resident in India, being an exporter who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may open, hold and maintain a Foreign Currency Account with a bank in India, provided that -

(a) approval as required under the Foreign Exchange Management (Export of goods and services) Regulations, 2015 has been obtained for undertaking the contract/ project/ export of goods or services, and

(b) the terms and conditions stipulated in the letter of approval have been duly complied with.

(G) Other cases

(1) The Indian agent of a shipping or an airline company incorporated outside India, may open, hold and maintain a Foreign Currency Account with an authorized dealer in India for meeting the local expenses in India of such airline or shipping company:

Provided that the credits to such accounts are only by way of freight or passage fare collections in India or from his principal outside India.

(2) An authorized dealer in India may, subject to the directions as may be issued by the Reserve Bank, allow shipmanning/crew managing agencies in India to open and maintain non-interest bearing foreign currency accounts in India for the purpose of undertaking transactions in the ordinary course of their business.

(3) An authorized dealer in India may, subject to the directions as may be issued by the Reserve Bank, allow Project Offices set up in India by foreign companies in terms of Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000 dated May 3, 2000, as amended from time to time to open, hold and maintain non-interest bearing one or more foreign currency accounts in India for the projects to be executed in India.

(4) An Indian company receiving foreign investment under FDI route in terms of Foreign Exchange Management (Transfer or Issue of security by a Person Resident outside India) Regulations, 2000 dated May 3, 2000, may open and maintain a foreign currency account with an Authorized Dealer in India.

Provided that the Indian investee company has impending foreign currency expenditure and the account shall be closed immediately after the requirements are completed and in no case shall be operational for more than six months from the date of opening of such account.

(5) An authorized dealer in India may, subject to the directions as may be issued by the Reserve Bank, allow opening temporary foreign currency accounts by organisers of international seminars, conferences, conventions etc. for holding such events in India for the receipt of the delegate fees and payment towards expenses including payment to special invitees from abroad.

5. Opening, holding and maintaining a Foreign Currency Account outside India:-

(A) Accounts of authorised dealers or their branches

(1) An authorised dealer in India may open, hold and maintain with his branch or head office or correspondent outside India, a Foreign Currency Account for the purpose of transacting foreign exchange business and other matters incidental thereto, in accordance with the provisions of the Act or the rules or regulations made or the directions issued thereunder.

(2) A branch outside India of a bank incorporated or constituted in India may open, hold and maintain with a bank outside India, a Foreign Currency Account for the purpose of carrying on normal banking business outside India, subject to compliance with the directions or guidelines issued from time to time by the Reserve Bank, and the regulatory authority in the country where the branch is located.

(B) Account by a company/ firm in the name of its office/ branch/ representative outside India

A firm or a company or a body corporate registered or incorporated in India (hereinafter referred to as ‘the Indian entity’) may open, hold and maintain in the name of its office (trading or non-trading) or its branch set up outside India or its representative posted outside India, a foreign currency account with a bank outside India by making remittances from India for the purpose of normal business operations of the office/ branch or representative;

Provided that –

(a) the overseas branch/ office has been set up or representative is posted overseas for conducting normal business activities of the Indian entity;

(b) the total remittances made under this sub-Regulation by the Indian entity, to all such accounts in an accounting year shall not exceed

(i) 15 per cent of the average annual sales/ income or turnover of the Indian entity during the last two financial years or up to 25 per cent of the net worth, whichever is higher, where the remittances are made to meet initial expenses of the branch or office or representative; and

(ii) 10 per cent of such average annual sales/ income or turnover during the last financial year where the remittances are made to meet recurring expenses of the branch or office or representative;

(c) the overseas branch/ office/ representative shall not enter in any contract or agreement in contravention of the Act, Rules or Regulations made thereunder;

(d) the account so opened, held or maintained shall be closed,

(i) if the overseas branch/ office is not set up within six months of opening the account, or

(ii) within one month of closure of the overseas branch/ office, or

(iii) where no representative is posted for six months,

and the balance held in the account shall be repatriated to India;

Provided further that the restriction contained in clause (b) of the first proviso shall not apply in a case where –

1) the remittances to the account maintained under this sub-Regulation are made out of funds held in EEFC account of the Indian entity, or

2) the overseas branch/ office is set up or representative posted by a 100% Export Oriented Unit (EOU) or a unit in Export Processing Zone (EPZ) or in a Hardware Technology Park or in a Software Technology Park, within two years of establishment of the Unit.

Explanation: For the purpose of this sub-Regulation,

1) Purchase of acquisition of office equipment and other assets required for normal business operations of the overseas branch/ office/ representative will not be deemed as a capital account transaction;

2) Transfer or acquisition of immovable property outside India, other than by way of lease not exceeding five years, by the overseas branch/ office/ representative will be subject to the Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015.

(C) Exporters

A person resident in India, being an exporter who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may open, hold and maintain a Foreign Currency Account with a bank outside India, provided that -

a) approval as required under the Foreign Exchange Management (Export of goods and services) Regulations, 2015 has been obtained for undertaking the contract/ project/ export of goods or services, and

b) the terms and conditions stipulated in the letter of approval have been duly complied with.

(D) For making Overseas Direct Investment

An Indian party may open, hold and maintain Foreign Currency Account abroad for the purpose of making overseas direct investments subject to the following terms and conditions:

(a) The Indian party is eligible for making overseas direct investment in terms of Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 as amended from time to time

(b) The host country regulations stipulate that the investment into the country is required to be routed through a designated account.

(c) The account shall be opened, held and maintained as per the regulation of the host country.

(d) The remittances sent to the account by the Indian party should be utilized only for making overseas direct investment into the Joint Venture/ Wholly Owned Subsidiary (JV/ WOS) abroad.

(e) Any amount received in the account by way of dividend and/ or other entitlements from the subsidiary shall be repatriated to India within 30 days from the date of credit.

(f) The Indian party should submit the details of debits and credits in the account on yearly basis to the designated AD bank with a certificate from the Statutory Auditors of the Indian party certifying that the account was maintained as per the host country laws and the extant FEMA regulations / provisions as applicable.

(g) The account so opened shall be closed immediately or within 30 days from the date of disinvestment from JV/ WOS or cessation thereof.

Explanation: For the purpose of this regulation, the expression ‘Indian party’ shall have the same meaning as assigned to it in Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004.”

(E) Other Cases

(1) Subject to compliance with the conditions in regard to raising of External Commercial Borrowings (ECB) or raising of resources through American Depository Receipts (ADRs) or Global Depository Receipts (GDRs), the funds so raised may, pending their utilisation or repatriation to India, be held in deposits in foreign currency accounts with a bank outside India.

(2) A shipping or airline company incorporated in India may open, hold and maintain with a bank outside India, a Foreign Currency Account for the purpose of undertaking transactions in the ordinary course of its business.

(3) Life Insurance Corporation of India or General Insurance Corporation of India and its subsidiaries may open, hold and maintain with a bank outside India, a Foreign Currency Account for the purpose of meeting the expenditure incidental to the insurance business carried on by them and for that purpose, credit to such account the insurance premia received by them outside India.

(4) Resident individuals may open, maintain and hold foreign currency accounts with a bank outside India for making remittances under the Liberalised Remittance Scheme (hereinafter referred to as the “Scheme”). The account may be used for putting though all transactions connected with or arising from remittances eligible under this Scheme.

(5) A person resident in India who has gone out of India to participate in an exhibition/ trade fair outside India may open, hold and maintain a Foreign Currency Account with a bank outside India for crediting the sale proceeds of goods on display in the exhibition/ trade fair:

Provided that the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/ trade fair.

(6) A person resident in India who has gone abroad for studies may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India.

Provided that all credits from India into the account shall be made in accordance with the Act, Rules and Regulations made thereunder.

Provided further that on his return to India, after completion of studies, such an account will deemed to have been opened under the Liberalised Remittance Scheme.

(7) A person resident in India who is on a visit to a foreign country may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India.

(8) (i) A citizen of a foreign State, resident in India, being an employee of a foreign company or a citizen of India, employed by a foreign company outside India and in either case on deputation to the office/ branch/ subsidiary/ joint venture/ group company in India of such foreign company may open, hold and maintain a foreign currency account with a bank outside India and receive the whole salary payable to him for the services rendered to the office/ branch/subsidiary/ joint venture/ group company in India of such foreign company, by credit to such account, subject to payment of taxes, as applicable in India.

(ii) A citizen of a foreign State resident in India being in employment with a company incorporated in India may open, hold and maintain a foreign currency account with a bank outside India and remit the whole salary received in India in Indian Rupees, to such account, for the services rendered to such an Indian company, subject to payment of taxes, as applicable in India.

Explanation:- For the purpose of this sub regulation, the expression ‘company’ shall include a ‘Limited Liability Partnership’ as defined under The Limited Liability Partnership Act, 2008.

6. Types of accounts:-

Unless otherwise specified in these Regulations, a Foreign Currency Account with an authorised dealer in India under these Regulations may be opened, held and maintained:

a) in the form of current or savings or term deposit account in cases where the account holder is an individual, and in the form of current account or term deposit account in all other cases:

Provided that the EEFC account referred to in Regulation 4 (A), shall be opened, held or maintained in a manner as prescribed by the Reserve Bank from time to time.

b) singly or jointly in the name of person eligible to open, hold and maintain such account.

7. Remittances out of the account after the account holder’s death:-

On the death of a foreign currency account holder, -

a) the authorised dealer with whom the account is held or maintained may remit to a nominee being a person resident outside India, funds to the extent of his share or entitlement from the account of the deceased account holder;

b) a nominee being a person resident in India, who is desirous of remitting funds outside India out of his share for meeting the liabilities abroad of the deceased, may apply to the Reserve Bank for such remittance;

c) A resident nominee of an account held outside India in accordance with Regulation 5 shall close the account and bring back the proceeds to India through banking channels.

8. Responsibility of authorised dealers maintaining foreign currency accounts:-

An authorised dealer maintaining foreign currency accounts shall -

a) comply with the directions issued by the Reserve Bank from time to time; and

b) submit periodic return or statement, if any, as may be stipulated by the Reserve Bank .

SCHEDULE I

[See Sub-Regulation (A) of Regulation 4]

Exchange Earner’s Foreign Currency (EEFC) Account Scheme

1. Limit up to which foreign currency may be credited to EEFC account

(1) A person resident in India may credit to the EEFC Account with an Authorised Dealer in India 100 percent of the foreign exchange earnings as specified here under:

i) inward remittance through banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder;

ii) payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area and also payments received in foreign exchange by a unit in Domestic Tariff Area for supply of goods to a unit in Special Economic Zone (SEZ);

iii) payments received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade, in accordance with the approval granted in terms of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, as amended from time to time;

iv) advance remittance received by an exporter towards export of goods or services;

v) payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorised dealer in India;

(vi) Professional earnings including director’s fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity.

(2) For the purpose of the sub-paragraph (1), payment received through an international credit card for which reimbursemen