{"id":29310,"date":"2021-04-24T12:36:57","date_gmt":"2021-04-24T07:06:57","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=29310"},"modified":"2021-04-24T12:40:09","modified_gmt":"2021-04-24T07:10:09","slug":"union-cabinet-sanctions-amendments-to-finance-bill-2021","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/","title":{"rendered":"Union Cabinet Sanctions Amendments to Finance Bill 2021"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Union\nminister on Tuesday render ex-post facto approval to the amendments to Finance\nBill announced this year. These amendments aim to render clarification on tax\nproposals for 2021-22. According to the government, these amendments were\nimperative to rationalize the proposals &amp; address concerns arising among\nthe stakeholders related to proposals cited in the Finance Bill. The law came\nto effect on March 28, 2021, after getting a green signal from the President of\nIndia.<\/p>\n\n\n\n<p>The government\nfurther cited that these amendments are regarding the tax proposals which were\nproposed to generate timely revenue for tax authorities and rationalize\nprevailing provisions by mending taxpayer&#8217;s grievances. The Finance Bill 2021,\nwhich bought tax proposals to life, was passed in higher house in March with\n127 amendments. The most substantial change includes;<\/p>\n\n\n\n<ul><li>Ten-year\nincome tax exemption for national banks for financial infrastructure &amp;\ndevelopment<\/li><li>Five-year\ntax exemption to Private development finance institutions, which can be\nstretched out for another five years.<\/li><\/ul>\n\n\n\n<p>The amendment\nalso declared that the equalization impose would not be applied on consideration\nof the sale of goods or services owned by individuals of India or by a\npermanent establishment of a non-resident in India. The final version of the\nsaid Bill has around 127 amendments. There are some valuable changes related to\nthe following<\/p>\n\n\n\n<ul><li>Business\nrestructuring<\/li><li>Depreciation\non goodwill<\/li><li>Dissolution\nor reconstitution of a firm<\/li><li>Slump\nsale<\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/#Critical_changes_made_to_the_Finance_Bill_2021\" >Critical changes made to the Finance Bill 2021<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/#Relaxation_Pertaining_to_Equalization_Levy\" >Relaxation Pertaining to Equalization\nLevy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/#Estimation_of_Capital_Gain_for_Slump_Sale\" >Estimation of Capital Gain for Slump Sale<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/#Written_Down_Value_WDV_to_Eradicate_Goodwill_Forming_Part_of_Assets\" >Written Down Value (WDV) to Eradicate\nGoodwill Forming Part of Assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/#Taxation_Applicable_to_Reconstitution_of_Firm\" >Taxation Applicable to Reconstitution of Firm<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/#Limitation_on_Exemption_Interest_Earned_on_Provident_Fund_Contribution\" >Limitation on Exemption Interest Earned\non Provident Fund Contribution<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-sanctions-amendments-to-finance-bill-2021\/#_Conclusion\" >&nbsp;Conclusion&nbsp;<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Critical_changes_made_to_the_Finance_Bill_2021\"><\/span>Critical changes made to the Finance Bill 2021<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The Section below discusses the critical changes made to the Finance Bill 2021<\/strong><\/em><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Critical-changes-made-to-the-Finance-Bill-2021.png\" alt=\"Critical changes made to the Finance Bill 2021\" class=\"wp-image-29343\" width=\"539\" height=\"482\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Critical-changes-made-to-the-Finance-Bill-2021.png 1002w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Critical-changes-made-to-the-Finance-Bill-2021-300x269.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Critical-changes-made-to-the-Finance-Bill-2021-768x688.png 768w\" sizes=\"(max-width: 539px) 100vw, 539px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Relaxation_Pertaining_to_Equalization_Levy\"><\/span>Relaxation Pertaining to Equalization\nLevy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Equalization\nLevy came to light on April 1, 2020, for non-resident e-commerce operators on\ndeliberations received from the web-based supply or services. E-commerce supply\nor service was defined to include &#8220;online sale of goods&#8221; &amp; &#8220;online\nprovision of services.&#8221; Finance Bill 2021 striven to render an explanation\nto include the following activities to be deemed as the online sale of goods or\nservices.<\/p>\n\n\n\n<ul><li>Acceptance\nof offer for sale<\/li><li>Acceptance\nof purchase order<\/li><li>Acceptance\nof offer for sale<\/li><li>The\nplacing of a purchase order<\/li><li>Supply\nof goods or provision of services<\/li><li>Payment\nof consideration<\/li><\/ul>\n\n\n\n<p>Another amendment sought to include consideration received or receivable from e-commerce supply or services regardless of whether the business owners own the goods. While this clarification is advantageous but, there are various aspects on which there is some confusion. This includes the imposition of a levy on transactions in a case where only one aspect of the transaction is carried out; for example, inter-company transactions or online payments are made against the transactions in a physical form.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/finance-act-2020-changes-in-gst\/\">Finance Act 2020 \u2013 Changes in GST<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Estimation_of_Capital_Gain_for_Slump_Sale\"><\/span>Estimation of Capital Gain for Slump Sale<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>On the slump sale\ntransactions front, the actual consideration of the slump sale transaction, as\nper provision under Section 50B, is deemed as the full value of consideration\nfor estimating capital gains. In laymen&#8217;s terms, there was no requirement for\nconsidering Fair Market Value or valuation exercise.<\/p>\n\n\n\n<p>An amendment\nseeks to provide that Fair Market Value if the division\/undertaking on the\ntransfer&#8217;s date (to be evaluated depends on the rules provided later) as a full\nvalue of consideration. Therefore, FMV shall have to be deemed regardless of\nthe transaction received by the seller.<\/p>\n\n\n\n<p>The seller has to\nre-estimate capital gains depending on Fair market value and would be\naccountable for paying the taxes and interest, as required advance tax would\nnot have been addressed by the taxpayer. While the government adheres to its\npledge of no retrospective changes, this explicitly is a retroactive amendment\nthat affects transaction that has been undertaken till March 23, 2021.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Written_Down_Value_WDV_to_Eradicate_Goodwill_Forming_Part_of_Assets\"><\/span>Written Down Value (WDV) to Eradicate\nGoodwill Forming Part of Assets<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Finance Bill 2021\nsought to amend the legal definition of &#8220;intangible asset&#8221; to put\ngoodwill of business or profession out of the equation, thus; making goodwill\nineligible for depreciation from the financial year 2021- both for prevailing\nand new goodwill obtained on or after April 1, 2020.<\/p>\n\n\n\n<p>It also provided\nto amend capital gains norms to provide that the acquisition&#8217;s cost of\nself-generated goodwill obtained in tax neutral transfer will stand nil. The\namendment encloses norms to tweak the closing written down value of assets by\nreducing the tax WDV of goodwill estimated as the difference between the real\ncost of goodwill &amp; depreciation permitted on such goodwill till March 31,\n2020. However, the reduction shall not surpass the closing written down value\nof intangible as if assets March 31, 2020. This ensures clarity on how one is\nrequired to estimate WDV in case of goodwill.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Taxation_Applicable_to_Reconstitution_of_Firm\"><\/span>Taxation Applicable to Reconstitution of Firm<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The provision\nabout the taxability of receipt of a capital asset or dissolution of\npartnership firms or stock in trade at the time of reconstitution proposed in\nthe Bill has been amended. The complete clauses have been revamped by the\ninculcation of an additional Section 9B.<\/p>\n\n\n\n<p>The new Section\ninculcated to ensure that the stock\u2013in trade by a partner\/member (in case of\nBody of Individuals\/ Association of Persons) or receipt of a capital asset on\ndissolution or reconstitution of the firm shall be considered to be transferred\nin hands to such firms.&nbsp; The profit margin reaped from such transfer based\non the Fair Market Value of such asset is open to taxes as capital gains as\nbusiness income.<\/p>\n\n\n\n<p>Section 45(4) has also stands revamped to provide for the estimation of capital gain in the hands of the member\/partner at the time firm&#8217;s reconstitution. The capital gain&#8217;s amount will be <strong><em>Fair market value<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Fair_market_value\"><strong><em>[1]<\/em><\/strong><\/a><\/sup> &amp; money obtained, surpassing the capital amount balance of the partner.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Limitation_on_Exemption_Interest_Earned_on_Provident_Fund_Contribution\"><\/span>Limitation on Exemption Interest Earned\non Provident Fund Contribution<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Finance Bill\n2021 declared that no exemption should be made accessible to interest income\naccumulated during the preceding year in the recognized provident fund to the\nextent it relates to the employees&#8217; contribution over Rs 2.5 lakhs made in the\nprevious year. Now, this condition is revamped by increasing the threshold sum\nto Rs 5 lakh if the employee makes no contribution to such fund.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"_Conclusion\"><\/span>&nbsp;Conclusion&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>On the whole, while some changes made to the supplementary amendments are proposed to clarify the ambiguity of the taxpayers, several adhere to practical importance. This mitigates the ambiguity amongst the taxpayer regarding any transaction undertaken. With the amendments equalization levy, slump sale, the taxpayer would stand accountable for paying taxes related to transactions undertaken before enacting the same. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/union-cabinet-approves-amendments-to-companies-act\/\">Union Cabinet Approves Amendments to Companies Act<\/a><\/mark><\/p>\n\n\n<a href=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/PIB1712856.pdf\" class=\"pdfemb-viewer\" style=\"\" data-width=\"max\" data-height=\"max\"  data-toolbar=\"bottom\" data-toolbar-fixed=\"off\">PIB1712856<br\/><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Union minister on Tuesday render ex-post facto approval to the amendments to Finance Bill announced this year. These amendments aim to render clarification on tax proposals for 2021-22. According to the government, these amendments were imperative to rationalize the proposals &amp; address concerns arising among the stakeholders related to proposals cited in the Finance [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":29342,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[153],"tags":[1688],"acf":{"service_id":"410"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":2893,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29310"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=29310"}],"version-history":[{"count":8,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29310\/revisions"}],"predecessor-version":[{"id":29346,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/29310\/revisions\/29346"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/29342"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=29310"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=29310"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=29310"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}