India: Key Amendments To The Finance Bill, 2017

The Finance Bill, 2017 which was presented by the Finance Minister in the Indian Parliament on 1 February 2017 (Original Bill) has been amended by the Lok Sabha (Amended Bill). This Ergo provides a snapshot of some of the key amendments sought to be made on the income-tax front.

Relief to non-residents investing in Foreign Portfolio Investors (FPIs) from tax on indirect transfer of Indian assets

Currently, an offshore transfer of shares or interest in a foreign company or entity triggers capital gains tax in India (subject to certain exemptions) in the hands of the non-resident transferor, where such share or interest derives "substantial value" from assets situated in India.

The Original Bill had exempted direct or indirect investments held by non-resident taxpayers in FPIs [that are registered as Category-I or Category-II with the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014 (SEBI Regulations)] from the scope of indirect transfer tax provisions. The Amended Bill has bifurcated this exemption as under:

  • For Financial Years (FY) 2011-12 to FY 2013-14: exemption from capital gains tax arising due to indirect transfer of Indian assets would be available to Foreign Institutional Investors (FII) as referred to in clause (a) of the Explanation to Section 115AD of the Income-tax Act, 1961 (IT Act);
  • For FY 2014-15 and onwards: exemption from capital gains tax arising due to indirect transfer of Indian assets would be available for Category-I and Category-II FPIs under the SEBI Regulations.

Thin capitalisation provision expanded

For limiting the deduction in respect of interest paid to non-resident associated enterprises, the Original Bill had proposed to introduce thin capitalisation norms by inserting Section 94B in the IT Act if the interest "paid" by an Indian company or a permanent establishment of a foreign company in India exceeded INR 10 million. The Amended Bill has expanded the scope of this proposal to provide that such disallowance shall be applicable even if such interest expenditure is accrued but not paid.

Relief provided to private family trusts from Section 56(2) taxation

Section 56(2) of the IT Act is currently specifically applicable to individuals, HUFs, closely held companies and firms (collectively, Specified Taxpayers). Currently, if the Specified Taxpayers (subject to certain exceptions) receives certain specified property without consideration or for inadequate consideration, then, the difference between the fair market value, to be computed as per prescribed formula, and the actual price paid (Difference) is taxable in the hands of the recipient provided the Difference exceeds INR 50,000.

The Original Bill had proposed to amend the Section 56(2) by widening the scope of type of taxpayers to be covered under this section to all "persons" for receipt of specified property, on or after 1 April 2017 unless they are specifically covered in the exempted category.

This had raised some concerns as to whether this would trigger taxation in case of settlement/contribution of assets into private family trusts as it was not covered within the exempted category.

In what is being seen as a sigh of relief, the government has specifically provided in the Amended Bill that receipt of property by a trust from an individual shall not attract liability under Section 56(2) provided such trust has been created or established solely for the benefit of relatives of the individual. The term "relative" is already exhaustively defined in IT Act.

Cash transactions above INR 2 lakhs to attract 100% penalty!

The Original Bill had proposed a penalty on any person who received INR 300,000 or more (a) in aggregate from a person in a day; (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee, cheque an account payee bank draft or use of an electronic clearing system through a bank account. The quantum of penalty proposed is equivalent to the amount received.

In furtherance of its objective to curb black money, boost digital payments, and move to a cashless economy, the Amended Bill has reduced the aforesaid monetary limit for cash transactions from INR 3,00,000 to INR 2,00,000. Consequential changes have also been proposed to TCS (tax collection at source) provisions within the IT Act.

Khaitan comment

The final print of the law would be effective only once it is passed by both the Houses of the Indian Parliament and receives Presidential assent. Meanwhile, one would hope that the Government notifies soon the list of share acquisitions which would be exempted from the rigors of the amendment which seeks to tax on-market sale of listed shares (even if such shares are held for more than 12 months) if securities transaction tax is not paid at the time of acquisition of shares. Lastly, the Amended Bill also provides some changes with respect to book profits computation under minimum alternate tax regime for Ind-AS compliant companies, mandates the quoting of Aadhaar number in the PAN application form and the income-tax returns, proposes amendments to various other acts [such as Companies Act, 2013, Securities Contracts (Regulation) Act, 1956 among others], provides for dissolution of certain tribunals (such as the Competition Appellate Tribunal among others) and ramifications surrounding the same would need to be seen.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Nishith Desai Associates
Khaitan & Co
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Nishith Desai Associates
Khaitan & Co
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions