With an effort to decode and simplify the amendments of Finance Bill, 2017, we bring to you a summary of the amendments vide a series of editions beginning from today. 

Capital Gains 

1. Sec. 43, 35AD : Disallowance of depreciation u/s 32 and capital expenditure u/s 35AD on cash payment

Amendment : Disallowance of depreciation u/s. 32 and capital expenditure u/s. 35AD on cash payment -

1. It is proposed to amend the provisions of Sec. 43 to provide in the definition of 'actual cost' that where an assessee incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque/ bank draft or use of electronic clearing system through a bank account, exceeds Rs. 10,000, such expenditure shall be ignored for the purposes of determination of actual cost of such asset.
2. It is further proposed to amend Sec. 35AD to provide that any expenditure in respect of which payment or aggregate of payments made in cash in excess of Rs. 10,000, no deduction shall be allowed in respect of such expenditure. Amendment will take effect from April 1, 2018. 

2. Sec. 47 : Providing tax neutrality for conversion of preference shares to equity shares

Amendment : In order to provide tax neutrality to the conversion of preference share of a company into equity share of that company, it is proposed to amend Sec. 47 to provide that the conversion of preference share of a company into its equity share shall not be regarded as transfer. Consequential amendments are also proposed in Sec. 49 and Sec. 2(42A) in respect of cost of acquisition and period of holding. Amendment will take effect from April 1, 2018

3. Sec. 49 : Cost of acquisition in Tax neutral demerger of a foreign company, Cost of Acquisition for units in Consolidating scheme of mutual fund

Amendment : It is proposed to amend Sec.49 so as to provide that cost of acquisition of the shares of Indian company referred to in Sec. 47(vic) in the hands of the resulting foreign company shall be the same as it was in the hands of demerged foreign company. Amendment will take effect from April 1, 2018; Sec 2(42A) and Sec 49 is proposed to be amended to provide that cost of acquisition of the units in the consolidated plan of mutual fund scheme shall be the cost of units in consolidating plan of mutual fund scheme and period of holding of the units of consolidated plan of mutual fund scheme shall include the period for which the units in consolidating plan of mutual fund scheme were held by the assessee. These amendments will take effect accordingly, from 1st April, 2017.

4. Sec. 2(42A), 49: Cost of Acquisition for units in Consolidating scheme of mutual fund

Amendment : Sec 2(42A) and Sec 49 is proposed to be amended to provide that cost of acquisition of the units in the consolidated plan of mutual fund scheme shall be the cost of units in consolidating plan of mutual fund scheme and period of holding of the units of consolidated plan of mutual fund scheme shall include the period for which the units in consolidating plan of mutual fund scheme were held by the assessee. These amendments will take effect accordingly, from 1st April, 2017.

5. Sec. 48 :Extension of capital gain exemption to Rupee Denominated Bonds

Amendment : In order further provide relief in respect of gains arising on account of appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company to secondary holders as well, it is proposed to amend Sec. 48 providing that the said appreciation of rupee shall be ignored for the purposes of computation of full value of consideration. 2. Further, with a view to facilitate transfer of Rupee Denominated Bonds from nonresident to non-resident, it is proposed to amend Sec. 47 so as to provide that any transfer of capital asset, being rupee denominated bond of Indian company issued outside India, by a non- resident to another non- resident shall not be regarded as transfer. Amendment will take effect from April 1, 2018. 

6. Sec. 50CA : Substitution of prescribed FMV on share transfer, to be full value of consideration

Amendment : It is proposed to insert a new Sec 50CA to provide that where consideration for transfer of share of a company (other than quoted share) is less than the Fair Market Value (FMV) of such share determined in accordance with the prescribed manner, the FMV shall be deemed to be the full value of consideration for the purposes of computing income under the head "Capital gains". This amendment will take effect from 1st April, 2018.

Anti - Abuse Measures

7. Sec. 11(1)(a)/(b): Charitable trusts: Corpus donations not be treated as ‘application of income’

Amendment : It is proposed to insert a new Explanation to section 11 of the Act to provide that any amount credited or paid out of contributions [which is considered as Trust’s income u/s Sec 11(1)(a)/(b)], being with specific direction that they shall form part of the corpus of the trust or institution, shall not be treated as application of income. It is also proposed to insert a proviso in Sec 10(23C) so as to provide similar restriction as above on the entities exempt under subclauses (iv), (v), (vi) or (via) of said clause in respect of any amount credited or paid out of their income. These amendments will take effect from 1st April, 2018 

8. Sec. 11 or 12A: Clarity of procedure in respect of change or modifications of object in case of entities exempt under sections 11 and 12

Amendment : It has been proposed to amend section 12A such that the registration of trust will have to be done afresh if the objects of the trust are modified by the assessee and where the objects which do not conform to the conditions of registration. The application for fresh registration needs to be made within a period of thirty days from the date of such adoption or modifications of the objects. The proposal has been made in light of lack of clarity in respect of fresh registration where existing.