Friday, 27 November 2015

Finance Minister’s Budget announcement – phasing out plan of deductions under the Income-tax Act – reg.

The Finance Minister in his Budget Speech, 2015 indicated that the rate of corporate tax will be reduced from 30% to 25% over the next four years along with corresponding phasing out of exemptions and deductions. This is a step towards simplification of tax laws, which is expected to bring about transparency and clarity. 

2. The Government proposes to implement this decision in the following manner: 

 Profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers. 
 The provisions having a sunset date will not be modified to advance the sunset date. Similarly the sunset dates provided in the Act will not be extended.
 In case of tax incentives with no terminal date, a sunset date of 31.3.2017 will be provided either for commencement of the activity or for claim of benefit depending upon the structure of the relevant provisions of the Act. 
 There will be no weighted deduction with effect from 01.04.2017.
3. Based on the above principles, the details of the phasing out plan to be implemented are as under: 

(i) Section 32 : The depreciation under the Income-tax Act is available up to 100% in respect of certain block of assets. The highest rate of depreciation under the Income-tax Act is proposed to be reduced to 60%. This is proposed to be made applicable from 01.4.2017. The new rate is proposed to be made applicable to all the assets (whether old or new) falling in the relevant block of assets. 

(ii) Section 35AD of the Income-tax Act provides for 100% deduction of capital expenditure (other than expenditure on land, goodwill and financial assets) incurred by certain specified businesses such as laying and operating a cross-country natural gas or crude or petroleum oil pipeline network, building hotel (two star and above), warehousing facility for sugar etc. However, in case of a cold chain facility, warehousing facility for storage of agricultural produce, an affordable housing project, production of fertiliser etc. weighted deduction of 150% of capital expenditure is allowed. It is proposed that no weighted deduction will be allowed on any specified business w.e.f 01.4.2017. 

(iii) Section 35AC: No deduction under section 35AC will be available from financial year 2017-18 (Assessment Year 2018-19). 

(iv) Section 35 of the Income-tax Act provides for deduction for expenditure incurred on scientific research. It allows for both capital and revenue expenditure and also allows for weighted deduction for donations made to certain institutions/associations/company for scientific research. It is proposed to provide that – 

(a) deduction under section 35(1)(ii), (iia), (iii) and 35 (2AA) is proposed to be restricted to 100% from F.Y 2017-18, and 

(b) deduction under section 35(2AB) of the Income-tax Act is proposed to be limited to 100% from Financial Year 2017-18 as against 200% available up to 31.03.2017 under the Income-tax Act. 

(v) There are certain tax incentives which at present do not have any sunset date for commencement of activity. It is proposed to provide a sunset date of 31.03.2017 for commencement of activity in the following cases:-

A) Development, operation and maintenance of infrastructure facility [Section 80-IA (4)(i)]. 

B) Development of special economic zone (Section 80-IAB).
C) Export of articles or things or services by a unit located in a Special Economic Zone (Section 10AA). 

D) Commercial production of natural gas in blocks licenced under CBM-IV and NELP VIII. [Section 80-IB(9)(iv)&(v)]. 

E) Commercial production of mineral oil from blocks licenced under a contract awarded up to 31.03.2011. [Section 80-IB(9)(ii)]. 

(vi) No weighted deduction is proposed to be provided under Section 35CCC and 35CCD from 01.04.2017. However deduction up to 100% of expenditure referred to therein shall be available. 

4. Comments on the aforesaid phasing out plan may be sent within 15 days to Director (TPL-III) on mail at or by post in an envelope under the caption "Phasing out of deductions" at the following address: 

Director (TPL III), Central Board of Direct Taxes, Room No. 147G, North Block, New Delhi 110001

Investment by Foreign Portfolio Investors (FPI) in Corporate Bonds

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000- RB dated May 3, 2000, as amended from time to time and toA.P. (DIR Series) Circular No. 71 dated February 3, 2015 and A. P. (DIR Series) Circular No.73 dated February 6, 2015 in terms of which all future investments by Foreign Portfolio Investors (FPI) in NCDs/bonds shall be required to be made in securities with a minimum residual maturity of three years.

2. On a review, it has been decided to permit FPI to acquire NCDs/bonds, which are under default, either fully or partly, in the repayment of principal on maturity or principal installment in the case of amortising bond. The revised maturity period of such NCDs/bonds, restructured based on negotiations with the issuing Indian company, should be three years or more.

3. The FPI which propose to acquire such NCDs/bonds under default should disclose to the Debenture Trustees the terms of their offer to the existing debenture holders / beneficial owners from whom they are acquiring. Such investment should be within the overall limit prescribed for corporate debt from time to time (currently Rs. 2443.23 billion). All other existing conditions for investment by FPIs in the debt market remain unchanged.

4. 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. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

Wednesday, 25 November 2015

NOTIFICATION No.F.3(352)Policy/VAT/2013/1062-73

In partial modification of Notification No.F.3(352)PolicyNAT/2013/929-940 dated 21/10/2015 regarding , submission of information online in Form DP-1, I, S. S. Yadav, Commissioner, Value Added Tax, Government of National Capital Territory of Delhi, in exercise of the powers conferred on me by sub-sectonrt) read with subsection (2) and (3) of section 70 and sub-section (2) of section 59 of Delhi Value Added Tax Act, 2004, notify that the Form DP-1 shall be submitted online by all the dealers latest by 31/12/2015. The form shall be filed by dealers registered upto 3111012015 ... Rest of the contents of the above said Notifications shall remain the same. 

RBI grants ‘in-principle’ approval to NPCI to function as the central unit for Bharat Bill Payment Systems (BBPS)

The Reserve Bank of India has today decided to grant 'in principle' approval to the National Payments Corporation of India (NPCI) to function as the Bharat Bill Payment Central Unit (BBPCU) in BBPS.

The Bharat Bill Payment System (BBPS), an integrated bill payment system, will function as a tiered structure for operating the bill payment system in the country with a single brand image providing convenience of 'anytime anywhere' bill payment to customers. As the central unit, NPCI will set necessary operational, technical and business standards for the entire system and its participants, and also undertake clearing and settlement activities. The present scope of BBPS will include utility bill payments, such as, electricity, water, gas, telephone and Direct-to-Home (DTH). Based on the experience, this would be extended to include other types of repetitive payments, like school / university fees, municipal taxes etc. in future.

The Operating Units will function as entities facilitating collection of bills/repetitive payments. Reserve Bank had invited applications for authorisation/approval to function as Operating Unit from non-banks/banks. The last date for receipt of such applications/approval requests was November 20, 2015. This had been extended to December 18, 2015.

As at the close of business on November 20, 2015, the Bank has received 12 applications for authorisation from non-bank entities and 18 requests for approval from banks for operating as a BBPOU. Reserve Bank would continue to receive further applications for authorisation/approval as Operating Units till close of business on Friday, December 18, 2015.

It may be recalled that the Reserve Bank of India had, vide circular dated November 28, 2014 issued guidelines for setting up the Bharat Bill Payment System (BBPS), wherein it was indicated that NPCI will function as BBPCU and there could be multiple Bharat Bill Payment Operating Units-BBPOUs (Operating Unit) under BBPS.

Anirudha D. Jadhav
Assistant Manager

Press Release : 2015-2016/1234

RBI grants “in-principle” approval to three applicants for setting up Trade Receivables Discounting System (TReDS)

In the Union Budget for 2015-16 the Honourable Union Finance Minister had highlighted the need for and use of TReDS for improving flow of funds to MSME sector by reducing the receivables realisation cycles. TReDS will allow SMEs to post their receivables on the system and get them financed. This will not only give them greater access to finance but will also put greater discipline on corporates to pay their dues on time.

In line with this, the Reserve Bank of India has today decided to grant "in-principle" approval to the following three applicants to set up and operate Trade Receivables Discounting System (TReDS) as per the Guidelines issued on December 03, 2014 under the Payment and Settlement System (PSS) Act 2007.

  1. NSE Strategic Investment Corporation Limited (NSICL) and Small Industries Development Bank of India (SIDBI), Mumbai

  2. Axis Bank Limited, Mumbai

  3. Mynd Solutions Pvt. Ltd., Gurgaon, Haryana

The "in-principle" approval granted will be valid for a period of 6 months, during which time the applicants have to comply with the requirements under the Guidelines and fulfil the other conditions as may be stipulated by the Reserve Bank. On being satisfied that the applicants have complied with the requisite conditions laid down by it as part of "in-principle" approval, the Reserve Bank would consider granting to them a Certificate of Authorisation for commencement of the business of TReDS.

Selection Process

As the TReDS will be a payment system authorised under the PSS Act 2007, an elaborate four-tiered structure of application processing was adopted for this purpose.

To start with, a preliminary scrutiny of the applications was done by the Department of Payment and Settlement Systems to vet the eligibility of the applicants vis-à-vis the requirements laid down in the Guidelines. In the next stage, the applicants were invited to make presentations before the Inter Department Group (IDG) comprising officials from various regulatory departments of the Reserve Bank and elaborate or clarify on areas, such as, the financial plan including source of funds, business plan including implementation time, process and technical plans as also issues related to risk management, grievance redressal, Business Continuity Plan / Disaster Recovery Management, etc.

In the third stage, the Committee of Governor and Deputy Governors reviewed the applications and the assessment of the IDG. As suggested by the Committee, another round of meeting with the shortlisted applicants was held to seek further information/clarifications. In the final stage, the recommendations made by this Committee was considered by the Board for Payment & Settlement System (BPSS) today and it approved grant of "in-principle" approval to the these applicants.


The Governor, in his statement on September 04, 2013 had announced the intention to facilitate Electronic Bill Factoring Exchanges in the country, which could electronically accept and auction MSME bills against large companies so that MSMEs could be paid promptly.

The Reserve Bank of India published a concept paper on "Micro, Small & Medium Enterprises (MSME) Factoring-Trade Receivables Exchangein March 2014 taking into account the interest expressed by a few entities and in consultation with select stakeholders. Subsequently, the draft guidelines for setting up of and operating TReDS were released on July 22, 2014.

Based on the feedback received from public/stakeholders, final guidelines were issued on December 03, 2014 under Section 10(2) read with Section 18 of the Payment and Settlement Systems (PSS) Act, 2007. Entities interested in setting up and operating TReDS were advised to apply for authorisation till February 13, 2015 which was further extended upto March 09, 2015.

The names of applicants who had applied for setting up TReDS was released on March 25, 2015.

Anirudha D. Jadhav
Assistant Manager

Press Release : 2015-2016/1235

Sovereign Gold Bonds, 2015-16

The Reserve Bank of India, in consultation with Government of India, had notified the issuance of Sovereign Gold Bonds, 2015-16 vide circulars IDMD.CDD.No. 939/14.04.050/2015-16 dated October 30, 2015 and IDMD.CDD.No. 968/14.04.050/2015-16 dated November 4, 2015. The first tranche of Sovereign Gold Bonds was open for subscription from November 5 to November 20, 2015. The bonds were to be issued on November 26, 2015.

Large number of applications has been received by banks and post offices. To enable smooth uploading of applications into RBI's E-kuber system, particularly by the post offices, it has since been decided to shift the issue date of the Sovereign Gold Bond from November 26, 2015 to November 30, 2015.

Other terms and conditions of the above circulars remain unchanged.

Anirudha D. Jadhav
Assistant Manager

Press Release : 2015-2016/1236