Finance Minister Niramla Sitharaman on Tuesday proposed changes in her Budget proposals, including equalisation levy provisions and tax benefits for private Development Financial Institution (DFI). However, she made no changes to the threshold for contributions to the Employees Provident Fund (EPF) for tax on interest, but subscribers to Government Provident Fund and other funds , where employers do not make any contribution, will have a higher threshold.

With these changes, the Lok Sabha approved the Finance Bill. It will now go to the Rajya Sabha and on it returning the Bill, will be sent to the President for assent. Then, the Bill will become a law.

Calculation of the levy

On the equalisation levy, the Minister said calculation of the levy will not be applicable for goods owned by Indians. Earlier, the Finance Bill had proposed that ‘consideration received or receivable’ shall include that received by e-commerce operator, whether the operator owns the goods or not and consideration for provision of service, irrespective of whether the service is provided or facilitated by the operator.

According to Rakesh Nangia, Chairman, Nangia Andersen India, it has now been clarified that such consideration shall not include consideration for sale of goods owned by a person resident in India or by a Permanent Establishment of a foreign entity. Similar amendment has been proposed on provision of services as well. Therefore, if goods or services listed on a foreign marketplace are owned or provided by an Indian resident or Indian PE of a foreign entity, the same shall be out of the purview of the levy. The small changes “amidst high expectations is a little disheartening for businesses owing to the wider implications of the levy,” he said.


On EPFO, Sitharaman admitted that the ₹2.5-lakh cap for EPFO taxation intended to cover a limited number of subscribers. But still it has been decided to raise the limit to ₹5 lakh provided there is no contribution by the employer. This means interest earned on contributions above ₹5 lakh will be taxable.

However, there is no change in the Budget announcement of restricting the tax exemption for the interest income earned on the employees’ contribution to various provident funds to ₹2.5 lakh annually. This shall be applicable for contributions made on or after April 1, 2021. For the proposed Development Financial Institution, the government has provided tax benefits. Accordingly, the institution owned by the government will get income tax benefit for 10 years. However, if the institution is set up by private sector under licence from the RBI , the income tax benefit will be for five years.

The government also clarified has proposed changes to provisions of goodwill (while calculating the written down value of block of assets) and also to the changes in capital gains on reconstitution of a partnership firm are primarily in the nature of clarificatory amendments. The amendment proposes that written down value of such goodwill carried forward from earlier years will be excluded/ reduced from the written down value of block of assets from Assessment Year 2021-22 onwards.