Important fact of the Pre-Budget Memorandum submitted by the Institute of Chartered Accountants of India

The ICAI (Institute of Chartered Accountants of India) Submits a Memorandum on Direct Taxes (including International Taxation) to the newly elected Government before the interim budget 2019 that should be presented by Minister of Finance Mrs. Nirmala Sitaraman.

The Direct tax council of the ICAI has submitted Pre-Budget Memorandum on Direct Taxes and International Taxation to the government. The Pre-budget memorandum containing 136 suggestions made by the Direct tax committee for the consideration of the Ministry of Finance, Government of India, while formulating the tax proposals of Interim Budget 2019 for the financial year 2019-20.

ICAI suggestions generally revolve around improving tax administration/collection/compliances, reducing litigation, rationalization of the provisions of various tax laws, removal of procedural/administrative difficulties, certain new initiatives, etc.

In the Pre-Budget Memorandum 2019, the ICAI’s suggestions on Direct Taxes & International Taxation can be broadly categorized under the following three heads:

• Part A: Suggestions relating to the policy & provisions of Income-tax Act, 1961.
• Part B: Suggestions for improving Tax Administration and Citizen Services.
• Part C: Suggestions pertaining to International Taxation.

The suggestions are given Chapter wise and are intended to serve the following purpose:

• Improve tax collection.
• Reduce/minimize litigations
• Rationalization of the provisions of direct tax laws.
• Removal of administrative and procedural difficulties relating to Direct Taxes
• Check tax avoidance

Major heads to be taken into consideration by the ministry of finance are:-

1. Preliminary

• Section 2(42A) – Reduction in holding period in case of immovable property, being land or building or both, to qualify as a long-term capital asset – Consequential amendments to be made in sections 54, 54B, 54D and 54F

2. Incomes Which Do Not Form Part of Total Income

• Section 10(32) – Income of minors – to increase exemption limits
• Section 10(23FB) – Tax exemption for Alternative Investment Funds – Venture Capital Funds
• Section 10(23C) – Annual Receipts
• Section 10(23C) – Rationalization of Provisions
• Section 10(12A) – Extending the benefit of tax-free withdrawal from NPS to nonemployee subscribers under section 10(12A) – Similar amendment may also be made in section 10(12B)
• Section 10(13) – Payment from an approved superannuation fund
• Section 10(23C) – Mandatory application of income by charitable trusts/ institutions

3. Computation of Total Income

• Deduction to salaried assesses – Payment for the notice period

4. Profit and Gains of Business and Profession Detailed Suggestions

• Section 28(iiia) – Sale of license
• Section 28(iiid) – Duty Entitlement Pass Book Scheme no more in existence
• Section 32 – Depreciation in case of slump sale
• Section 32AC – Slump Sale and investment allowance
• Section 35D – Amount paid for an increase in authorized capital
• The due date for crediting the contribution of employees to the respective fund – Section 36(1)(va) read with Section 2(24)(x)
• Section 40(b)(v) – Raise in allowable expenses in the form of remuneration to working partner Explanation 5 to Section 43(1) – “building” to be replaced by “assets”
• Section 43D – Taxability of interest on Non-Performing Asset
• Section 44AD -Presumptive Income – Some Issues
• The benefit of presumptive taxation to LLP – Section 44AD
• Section 44ADA – Special provision for computing profits and gains of profession on the presumptive basis – Issues and concerns arising therefrom to be addressed

1. Threshold limit of Rs 50 lakhs may be increased

2. Rate of estimated tax @ 50% too high

• Section 44AE – Clarification required w.r.t. ‘gross vehicle weight; or ‘unladen weight’

5. Capital Gains

•  Limited Liability Partnership (LLP) –

1. Merger and Amalgamation of Limited Liability Partnership to be Revenue Neutral
2. Section 47 – Insertion of clause (viab) to provide an exemption in respect of the transfer of capital asset consequent to the amalgamation of foreign companies – Consequent exemption to be provided in respect of the transfer of shares by resident shareholders
3. The consequential amendment required in section 47(xiiib)
4. Section 47(xiiib) – Conversion of company into LLP – Clarification required relating to an additional condition

• Business reorganizations – Section 47(x)/(xa)
• 47(x) & (xa) and 49(2A) – Capital Gain on Conversion of Foreign Currency Exchangeable Bonds (FCEB) and other Bonds & Debentures
• Section 54EC – Time Limit for investment in specified bonds
• Reference to the Valuation Officer – Section 55A

6. Income from Other Sources

• Definition of the term relative – Explanation to Section 56(2) (vii)
• Section 56(2)(viii) – reference to section 145A(b) be changed to 145B(1)
• Section 56(2)(x) – Certain exceptions to be provided w.r.t. conversion
• Section 56(2)(x) read with sections 43CA, 50C, 50CA – Issues to be addressed

For a detailed list of suggestion given in memorandum check the link https://resource.cdn.icai.org/55499dtc44870.pdf