By TIOL News Service

NEW DELHI: MAY 06, 2016: THE Lok Sabha on Tuesday gave its nod to the Finance Bill, 2016, which was passed by voice vote with several amendments. Following is the snap shot of some of the important amendments made on the direct tax side.

Limited Liability Partnership

The LLPs now have been added along with the companies for the purpose of tax exemption. This means that the start-ups will also have the flexibility of setting up LLPs having lesser compliance and still enjoy the first three years of tax holiday.

Rate of tax for companies

The tax rate of 25% that has been promised by the government has been granted to new companies provided such companies do not claim any of the incentives and deductions. It has now been clarified that the option has to be exercised by the company in the first year for which return is due and once the option is exercised the same cannot be withdrawn for the same or any other previous year.

Patent box regime – option given to assesses

In terms of the newly inserted Section 115BBF, when an eligible assesse received royalty in respect of a patent developed and registered in India, the same was to be taxed @10%.Through the government amendment, the eligible assesse may now exercise an option in the prescribed manner on or before the de date of filing the return. However, if in any of the five successive years, the assesse opts not to be governed by this rate then for five succeeding years the assesse cannot claim the benefit of this section.

Besides, it has been provided that at least 75% of the expenditure (not all) has to be incurred in India for the development of the patent.

Income declaration scheme

An amendment has been made to Section 49 of the Income Tax Act and a new sub-Section 5 has been inserted that says that where the assesse has paid the taxes and penalty etc. in accordance with the scheme ion the fair market value of the asset in question, then for any subsequent capital gains, such fair market value that has been taken into account for the purpose of the scheme shall be deemed to be the cost of acquisition.

Changes made after scrapping of the proposed taxation of EPF etc.

Consequential amendments have been made pursuance to the roll back of the proposal to tax withdrawals from EPF etc. as was originally proposed in the Finance Bill.

Dividend tax

The Finance Bill had introduced Section 115BBDA that said that individuals, HUFS, firms earning income of more than 10 lakhs by way of dividends paid by a domestic company shall pay tax on such dividends @ 10%. It has been clarified that this will trigger when the income from dividends exceed in the aggregate Rs 10 lakhs.