22 March 2017
Proposed amendments to the Finance Bill, 2017
Background
The Finance Bill, 2017 (the Bill) was introduced by the
Finance Minister in the Lok Sabha on 1 February
2017. On 20 March 2017, the amendments to the Bill
have been tabled in the Lok Sabha by notice of
1
amendments . The key amendments are summarised
as follows:
Amendments with respect to Section
56(2)(x)

The Bill proposed to insert a new clause (x) in
Section 56(2) so as to provide that receipt of the
sum of money or value of property by any person
without consideration or for inadequate
consideration in excess of INR50,000 shall be
chargeable to tax.
It is now proposed to amend the definition of the
term ‘income’ under Section 2(24) of the Incometax Act, 1961 (the Act) to include the receipt of the
sum of money or value of property without
consideration or for inadequate consideration
under Section 56(2)(x).

The Bill proposed to widen the scope of
exceptions provided in Section 56(2)(x) by
including the receipt by certain trusts or
institutions and receipt by way of certain transfers
not regarded as a transfer under Section 47 of the
Act.
____________________
It is now proposed that the exclusion list given
under Section 56(2)(x) to be amended to
provide that the said section will not apply to the
sum of money or property received from an
individual by a trust created or established
solely for the benefit of a relative of the
individual.
Interpretation of 'terms' used in the tax
treaty
The Bill proposed that where any term used in the
tax treaty has not been defined under the tax treaty,
it shall be assigned the meaning as defined in the
Act or any explanation issued by the Central
Government.
It is now proposed that the term shall be assigned
the meaning as defined in the act or explanation if
any given by the Government.
Limitation of interest deduction (thin
capitalisation) in certain cases
The Bill introduced thin capitalisation related
provisions under Section 94B to provide that where
an Indian company or Permanent Establishment
(PE) of a foreign company, being borrower, pays
interest or similar consideration exceeding INR1
crore, it shall be limited to 30 per cent of earnings
before interest, taxes, depreciation and amortisation
(EBITDA) or interest paid or payable to associated
enterprises, whichever is less.
1
The amended Finance Bill 2017 has been passed by Lok Sabha today. The
proposed amendments to the Bill will become law only after it receives the
assent of the President of India.
© 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
This provision has been amended to provide that
the Indian company or PE of a foreign company,
being borrower, incurs any expenditure by way of
interest or of a similar nature exceeding INR1 crore,
it shall be limited to 30 per cent of EBITDA or
interest paid or payable to associated enterprises,
whichever is less. Accordingly, the thin capitalisation
provisions have been linked to the incurrence of
expenditure by way of interest or of a similar nature
of expenditure.
Proposals for MAT-Ind AS compliant
companies
The Bill while introducing proposals on computation
of book profit for Ind AS compliant companies for
the purpose of levy of Minimum Alternate Tax (MAT)
defined a new term ‘transition amount’ which means
the amount or aggregate of the amount adjusted in
the other equity (excluding equity component of
compound financial instruments, capital reserve,
and securities premium reserve) on the date of
adoption of Ind AS but excluding certain exclusions
specified.
The amendments to the Bill have amended the
definition of the term ‘transition amount’ by omitting
the words ‘equity component of compound financial
instruments’. It appears that the definition of
‘transition amount’ given under the Bill would have
created inconsistencies in the tax treatment of
certain convertible financial instrument v/s other
similar instruments. Therefore, the transition amount
would now include the ‘equity component of
compound financial instruments’ and the book
profits in the year of adoption of Ind AS i.e. 1 April
2016 for phase I companies in the Ind AS road map
and each of the subsequent four years may need to
be adjusted with one-fifth of the transition amount.
Clarity relating to ‘indirect transfer’
provisions vis-à-vis FII/FPI
The Bill proposed to amend Section 9(1)(i) to clarify
that Explanation 5 shall not apply to any asset or
capital asset mentioned therein being investment
held by non-resident, directly or indirectly, in Foreign
Institutional Investors (FII) registered as Category I
or Category II Foreign Portfolio Investors (FPI)
It is now proposed to exclude asset or capital
asset mentioned therein, which is held by a nonresident by way of investment, directly or
indirectly, in a FII from AY 2012-13 to AY 201516. As proposed in the Bill, exclusion of FPIs
(Category I and II) from indirect transfer related
provisions under Section 9(1)(i) continues (earlier
Explanation has now been included by way of a
proviso).
Amendment in Section 206C of the Act
dealing with cash sales of jewellery
The Bill amended Section 206C of the Act to
remove the Tax Collected at Source (TCS)
related obligation dealing only with cash sales of
jewellery.
It is now proposed to do away with the TCS
related obligation on such seller who receives
cash consideration for the sale of bullion or
jewellery or any other goods or providing any
service.
Restriction on cash transactions
In order to achieve the mission of the
Government to move towards a less cash
economy to reduce generation and circulation of
black money, the Bill proposed to insert Section
269ST in the Act to provide that no person shall
receive an amount of INR3 lakh rupees or more,
in aggregate from a person in a day; in respect of
a single transaction; or in respect of transactions
relating to one event or occasion from a person,
otherwise than by an account payee cheque or
account payee bank draft or use of electronic
clearing system through a bank account. The Bill
also proposed to levy the penalty of a sum equal
to the amount of such receipt on a person who
receives a sum in contravention of the aforesaid
provisions.
Section 269ST is now proposed to be amended
to reduce the limit from INR3 lakhs to INR2 lakhs
by making an amendment in the Bill. Thus, any
receipt of INR2 lakhs or more in cash will attract
100 per cent penalty in the hands of the recipient.
Quoting of Aadhaar number in certain
cases
under the Securities and Exchange Board of India
(SEBI) (FPIs) regulations, 2014, with effect from 1
The amendments to the Bill proposed to
April 2012.
introduce a new Section 139AA whereby every
person eligible to obtain Aadhaar number shall on
or after 1 July 2017, quote Aadhaar number in
© 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
the application for allotment of Permanent Account
Number (PAN) and in the return of income.
However, where the person does not possess the
Aadhaar number as on 1 July 2017, the enrollment
ID of Aadhaar application form issued to him at the
time of enrolment shall be quoted in the application
for PAN or as the case may be, in the return of
income furnished by him.
In the case of failure to intimate the Aadhaar
number, the PAN allotted to the person shall be
deemed to be invalid and the other provisions of the
Act shall apply, as if the person had not applied for
allotment of PAN.
Amendments to various Acts regarding
merger of Tribunals and other authorities
A new Part XI is proposed to be introduced in the
Bill to provide for amendments to various Acts
regarding the merger of Tribunals and other
authorities. It has been proposed to merge seven
existing Tribunals i.e. the Competition Appellate
Tribunal, Appellate Tribunal for Foreign Exchange
under FEMA, EPF Appellate Tribunal, the Copyright
Board under the Copyright Act, the Railway Rates
Tribunal under the Railway’s Act, the National
Highways Tribunal under the control of National
Highways (Land & Traffic) Act, the Cyber Appellate
Tribunal under the Information Technology Act.
Officials of these seven Tribunals shall cease to
hold office from the appointed date.
There is a proposal for consolidation of appointment
rules (with respect to terms and conditions of
service, salary and allowances, etc.) for President,
Vice President, Chairman, Vice-Chairman and
members (officials) of 19 Tribunals, which includes Income Tax Appellate Tribunal (ITAT), Central
Excise and Service Tax Tribunal (CESTAT),
Securities Appellate Tribunal (SAT), National
Company Law Appellate Tribunal (NCLAT),
Authority for Advance Rulings (AAR) under the Act,
National Green Tribunal (NGT), TD-SAT, etc.
NCLAT to exercise jurisdiction for Competition
Appellate Tribunal.
© 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
www.kpmg.com/in
Ahmedabad
Commerce House V, 9th Floor,
902 & 903, Near Vodafone House,
Corporate Road,
Prahlad Nagar,
Ahmedabad – 380 051
Tel: +91 79 4040 2200
Fax: +91 79 4040 2244
Bengaluru
Maruthi Info-Tech Centre
11-12/1, Inner Ring Road
Koramangala, Bangalore 560 071
Tel: +91 80 3980 6000
Fax: +91 80 3980 6999
Chandigarh
SCO 22-23 (Ist Floor)
Sector 8C, Madhya Marg
Chandigarh 160 009
Tel: +91 172 393 5777/781
Fax: +91 172 393 5780
Chennai
No.10, Mahatma Gandhi Road
Nungambakkam
Chennai 600 034
Tel: +91 44 3914 5000
Fax: +91 44 3914 5999
Delhi
Building No.10, 8th Floor
DLF Cyber City, Phase II
Gurgaon, Haryana 122 002
Tel: +91 124 307 4000
Fax: +91 124 254 9101
Mumbai
Lodha Excelus, Apollo Mills
N. M. Joshi Marg
Mahalaxmi, Mumbai 400 011
Tel: +91 22 3989 6000
Fax: +91 22 3983 6000
Hyderabad
8-2-618/2
Reliance Humsafar, 4th Floor
Road No.11, Banjara Hills
Hyderabad 500 034
Tel: +91 40 3046 5000
Fax: +91 40 3046 5299
Noida
6th Floor, Tower A
Advant Navis Business Park
Plot No. 07, Sector 142
Noida Express Way
Noida 201 305
Tel: +91 0120 386 8000
Fax: +91 0120 386 8999
Kochi
Syama Business Center
3rd Floor, NH By Pass Road,
Vytilla, Kochi – 682019
Tel: +91 484 302 7000
Fax: +91 484 302 7001
Pune
703, Godrej Castlemaine
Bund Garden
Pune 411 001
Tel: +91 20 3050 4000
Fax: +91 20 3050 4010
Kolkata
Unit No. 603 – 604,
6th Floor, Tower – 1,
Godrej Waterside,
Sector – V, Salt Lake,
Kolkata 700 091
Tel: +91 33 44034000
Fax: +91 33 44034199
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and
timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such
information without appropriate professional advice after a thorough examination of the particular situation.
© 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
© 2017 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.