A. TAX UPDATES
1) Change in Corporate Tax Rates
- Corporate Tax Rate reduced to 25% for existing domestic companies with turnover or gross receipts in FY 2015-16 =< INR 50 crores;
2) Scope of Tax on Dividend in the hands of recipient
- Existing tax on dividend in excess of INR 10 lakhs under section 115BBDA to be on all residents except domestic company and certain funds, trusts, institutions, etc.;
3) Tax deduction to Start-ups Extended Period
- Existing deduction under section 80-IAC by eligible start-ups can be claimed for any 3 consecutive years out of 7 years (as against existing period of 5 years) beginning from the year in which such eligible start-up is incorporated;
4) Carry forward and set off of loss in case of Eligible Start-ups
In case of eligible start-ups, the loss incurred in any year prior to the previous year shall be carried forward and set off against the income of previous year, if all the shareholders of such company which held shares carrying voting power on the last day of the year or years in which the loss was incurred:
- continue to hold those shares on the last day of such previous year; and
- such loss incurred during the period of seven years beginning from the year in which such company is incorporated;
5) Carry forward of MAT and AMT credit – Extended period and restriction on carry forward
- Minimum Alternate Tax (‘MAT’) and Alternate Minimum Tax (‘AMT’) credit can be carried forward up to 15th assessment years immediately succeeding the assessment years in which such tax credit becomes allowable;
- MAT/ AMT credit not to be allowed to be carried forward to subsequent year to the extent such credit relates to the difference between the amount of foreign tax credit (FTC) allowed against MAT/ AMT and FTC allowable against the tax computed under regular provisions of Act other than the provisions relating to MAT/AMT.
6) Indirect transfer provisions- clarification
- Explanation 5 to section 9(1)(i) not apply to any asset or capital asset mentioned therein being investment held by non-resident, directly or indirectly, in a Foreign Institutional Investor registered as Category-I or Category II Foreign Portfolio Investor under the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 made under the Securities and Exchange Board of India Act, 1992;
(effective from AY 2012-13 and subsequent years)
7) Fee on delay in filing of Return of Income (Section 234F – newly inserted)
For AY 2018-19 and onwards in case, return is not filed within the due dates as per Section 139(1), following fee shall be levied:
- INR 5,000 if return is furnished on or before 31st December of AY;
- INR 10,000 in other cases;
- Aforesaid fee restricted to INR 1,000 in case total income upto INR 5 Lakhs;
- Existing penalty under section 271 F for failure to furnish return dispensed with;
8 ) Exemption of long term capital gains tax u/s 10(38)
- Exemption for income arising on transfer of equity shares to be available only if the acquisition of share is chargeable to Securities Transactions Tax under Chapter VII of the Finance (No 2) Act, 2004;
- However, to protect the exemption for genuine cases, the aforesaid shall not apply on acquisitions of shares to be notified by Central Government in this behalf;
9) Fair Market Value deemed to be the consideration in certain cases
Where consideration for transfer of share of a company (other than quoted share) is less than the Fair Market Value (FMV) of such share determined in accordance with the prescribed manner, the FMV shall be deemed to be the full value of consideration for the purposes of computing capital gains income;
B. REGULATORY UPDATES
1) SEBI Board Meeting
On 23 November 2016, the SEBI held its Board Meeting wherein the following decisions were taken:
- Amend SEBI (Alternative Investment Funds) Regulations, 2012 with respect to ‘Angel Funds’ namely:
- Upper limit for number of angel investors increased from forty nine to two hundred
- Definition of start-up for Angel Funds investments be similar to definition of Department of Industrial Policy and Promotion (DIPP) as given in their startup policy
- Minimum investment in the venture capital undertaking reduced from fifty lakhs to twenty five lakhs
- Lock in requirements of investments reduced from three years to one year
- allowed to invest in overseas venture capital undertakings upto 25% of their investible corpus in line with other Alternative Investment Funds (AIF)
- Amend SEBI (FPI) Regulations, 2014 to allow FPIs to invest in unlisted non-convertible debentures and securitized debt instruments.
- between private equity funds and promoters, directors and key management personnel of listed companies to incentivize the latter.
2) External Commercial Borrowings (ECB) for Start-ups
On 4 October 2016, the Reserve Bank of India (‘RBI’) issued statement on developmental and regulatory policies whereby ECBs were permitted up to USD 3 million in start-ups. Guidelines on the same have been issued on 27 October 2016.
3) RBI Circular on Investment by FVCI
On 20 October 2016, RBI issued an A.P. (DIR Series) Circular in continuation to the FEMA Notification 363/2016 dated 28 April 2016. Two important clarifications in the A.P. (DIR Series) Circular are as follows:
- Downstream investments by a VCF or a Cat-I AIF, which has received investment from FVCI, shall have to comply with the provisions for downstream investment as laid down in Schedule 11 of the Principal Regulations.
- An entity receiving investment directly from a registered FVCI will be required to report the investment, in form FCGPR.
4) Notification of various sections under the Companies Act, 2013
The Ministry of Corporate Affairs has notified the much-awaited sections in the Companies Act, 2013 dealing with amalgamation, compromise, arrangement, liquidation and winding up. The notified sections will be effective from 15 December, 2016, and are likely to bring a paradigm shift in the manner in which these important restructurings are implemented. Going forward, the National Company Law Tribunal (NCLT) will have jurisdiction over these matters, which until now were within the jurisdiction of the High Court. NCLT has been setup as a specialised body to deal with Company Law matters.