Key direct tax related amendments announced in Budget 2021:

Re-opening of assessment is proposed to be reduced to 3 years from 6 years. Only where evidence of concealment of Income of INR 50 lakhs or more – re-opening can be made up to 10 years and only with approval of Pr.CCIT.;

Reducing Litigation for small tax payers – Constitution of Faceless Dispute Resolution Panel for people with Total Income up to INR 50 lakh and disputed income of INR 10 lakh;

Income Tax Appellate Tribunal to become Faceless – Only electronic communication will be done;

Relaxation to NRIs – Rules to remove hardship of Double Taxation;

Tax Audit Limit to be increased to INR 10 crores from INR 5 crores for those having less than 5% cash transactions;

Advance tax liability on dividend income will arise only after declaration or payment of dividend.

Dividend income received by REIT / InvIT from specified SPVs, now exempt from tax deduction at source effective 01 April 2020;

Tax withholding on payments to FPIs to be circumscribed by tax treaty rates (wherever beneficial);

Tax Holiday for Capital Gains for Aircraft Leasing Companies and Tax Exemption to Lease paid to Foreign Persons;

Infrastructure debt fund added to the list of Zero-Coupon Bonds

Pre-Filling of Returns – Details of Capital Gains, Dividend Income and Interest income will be pre-filled in the returns

Tax holiday for Start-Ups extended to 31st March 2022. Capital Gains exemption on investment in start ups also extended to 31s March 2022.

Presently SWF/PFs may invest in a Category-I or Category-II Alternative Investment Fund, having 100% investment in eligible infrastructure company. It is proposed to:
– relax the condition of 100% to 50%.
– allow the investment by Category-I or Category-II AIF in an Infrastructure Investment Trust (InvIT).
– Exemption under this clause shall be calculated proportionately, in case if aggregate investment of AIF in infrastructure company or companies or in InvIT is less than 100%

Proposed companies act related amendments :

Definition of Small Companies under Companies Act 2013 amended by increasing their thresholds for paid up capital from “not exceeding INR 50 Lakh” to “not exceeding INR 2 Crore” and turnover from “not exceeding INR 2 Crore” to “not exceeding INR 20 Crore”.

One Person Companies (OPCs) would be allowed to grow without any restrictions on paid up capital and turnover, can convert into any other type of company at any time, the residency limit for an Indian citizen to set up an OPC is reduced from 182 days to 120 days and Non Resident Indians (NRIs) are also permitted to incorporate OPCs in India. These measures shall benefit Start-ups and Innovators.

To ensure faster resolution of cases, NCLT framework will be strengthened, e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced

Data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0 shall be introduced in fiscal 2021-22. This Version 3.0 will have additional

GIFT IFSC related announcements

Govt. of India to support the development of world-class Fintech hub at GIFT IFSC;

Re-domiciliation of Offshore funds:
– Transfer of capital asset by an Offshore Fund (original fund) to a Resultant Fund upon re- domiciliation to an IFSC, before 31 March 2023 – not regard as transfer of capital asset
– For non-residents, capital gains exemption on account of treaty benefits for investments – to be continued under the domestic tax law;
– Cost and holding period protected;

IFSC Banking Units:
– Exemption on income earned on transfer of Non-Delivery Forwards by non-residents where the IBUs have commenced their operations before 31 March 2024;
– Special tax regime for IBUs making public market investments in India – at par with Cat III AIFs in IFSC;

Aircraft leasing & financing:
Any income by way of royalty on account of lease rental paid to foreign enterprises has been exempted;
Gains on disposal/ sale of aircraft to be exempt;