In the recently concluded second part of the Budget session in Parliament, important bills concerning taxation, land laws, afforestation, biotechnology, bankruptcy and insolvency were discussed and passed. This report is a two-part series to analyse the impact of important bills tabled in the Parliament.
The Finance Bill
The bill proposed several tax changes and the Lok Sabha put its stamp on the on the government’s tax proposals for the year aimed at reducing litigation, checking tax evasion and simplifying tax laws.
Income Tax Amendment
Surcharge: The surcharge levied on income tax to be increased from 12% to 15% for individuals whose annual income exceeds Rs 1 crore. However, the tax slabs for calculation of income remained the same.
Rebate: Currently, an individual with income up to Rs 5 lakh can get a rebate of 100% on the income tax payable. However, the rebate amount is capped at Rs 2,000, which would be increased to Rs 5,000.
House rent deduction: Limit of income tax deduction that can be claimed on house rent payment is to be raised from Rs 24,000 per annum to Rs 60,000. This would be applicable to persons who live in rented houses and whose employers do not provide house rent allowance benefits.
Corporate Tax Amendments
Currently, the income tax applicable for companies is 30% of their annual income. In case of a domestic company, the Bill amended the rate of income tax to 29%, down from 30%, if the total turnover in the previous year (2014-15) did not exceed Rs 5 crore. However, the tax rate remained at 30% for all other cases.
New manufacturing companies incorporated on or after March 1, 2016 to be given an option to be taxed at the rate of 25%, provided they do not claim certain deductions.
The Finance Bill also includes certain legislative changes.
The Finance Bill, 2016 also amended the Reserve Bank of India Act, 1934 to establish a Monetary Policy Committee. The Monetary Policy Committee would determine the policy rate required to achieve the country’s inflation target.
Further, the Finance Bill also includes provisions that amend the Foreign Contribution (Regulation) Act (FCRA), 2010. This Act regulates the acceptance of foreign contributions to individuals or companies.
The amended bill also rolled back provisions relating to taxation of withdrawals from the Employees’ Provident Fund. The amended bill was finally cleared by the Lok Sabha on May 5th.
The Compensatory Afforestation Fund Bill, 2015
The Bill establishes the National Compensatory Afforestation Fund under the Public Account of India, and a State Compensatory Afforestation Fund under the Public Account of each state
These Funds will receive payments for compensatory afforestation, net present value of forest and other project specific payments. The National Fund will receive 10% of these funds, and the State Funds will receive the remaining 90%.
These Funds will be primarily spent on afforestation to compensate for loss of forest cover, regeneration of forest ecosystem, wildlife protection and infrastructure development.
The Bill also establishes the National and State Compensatory Afforestation Fund Management and Planning Authorities to manage the National and State Funds.
The bill, cleared by the Lok Sabha, expects to be passed by the Rajya Sabha in the next session.
Enemy Property Bill
The Bill amends the Enemy Property Act, 1968, to vest all rights, titles and interests over enemy property in the Custodian. The Bill declares transfer of enemy property by the enemy, conducted under the Act, to be void. This applies retrospectively to transfers that have occurred before or after 1968. Further, the Bill prohibits civil courts and other authorities from entertaining disputes related to enemy property.
The amendments include that once an enemy property is vested in the Custodian, it shall continue to be vested in him as enemy property irrespective of whether the enemy, enemy subject or enemy firm has ceased to be an enemy due to reasons such as death.
The new Bill ensures that the law of succession does not apply to enemy property; that there cannot be a transfer of any property vested in the Custodian by an enemy or enemy subject or enemy firm and that the Custodian shall preserve the enemy property till it is disposed of in accordance with the Act.
The amendments are aimed at plugging the loopholes in the Act to ensure that the enemy properties that have been vested in the Custodian remain so and do not revert to the enemy subject or firm.
The bill was passed by the Lok Sabha is March and currently awaits clearance from the Rajya Sabha.
Insolvency and Bankruptcy Code
The Insolvency and Bankruptcy Code received the President’s assent on May 28 and was notified in the Gazette of India soon after.
Key features of the code are : The Code creates time-bound processes for insolvency resolution of companies and individuals. and seeks to complete these processes within 180 days. If insolvency cannot be resolved within the stipulated deadline, the assets of the borrowers may be sold to repay creditors.
Two distinct processes for resolution of individuals, namely- “Fresh Start” and “Insolvency Resolution” Debt Recovery Tribunal.
National Company Law Tribunal to act as Adjudicating Authority and deal with the cases related to insolvency, liquidation and bankruptcy process in respect of individuals and unlimited partnership firms and in respect of companies and limited liabilities entities respectively.
Establishment of an Insolvency and Bankruptcy Board of India to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and information utilities.
Further, to facilitate insolvency resolution, the code establishes Information Utilities (IUs) to collect, collate and disseminate financial information.
(This report is published with the support and help of PRS Legislative, an independent think-tank tracking the legislative functions in India)