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Highlights of Budget 2017-18

Meenu 
on 02 February 2017

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Rate of Income Tax

  • 5% of income tax to be charged for income tax slab of 250000 to 500000 instead of 10%
  • Surcharge of 10% for those whose annual income is Rs 50 lakh to 1 crore;
  • Tax rate for companies with an annual turnover up to 50 crores to be reduced to 25%, to strengthen MSME sector
  • Not to remove Minimum Alternative Tax in 2017-18; propose to allow a carry forward of MAT for a period of 15 years as against 10 years now

Deduction of tax at source  in the case of certain individuals and Hindu undivided family

Section 194IB -

  • It provides that Individuals or a HUF (other than those covered under 44AB of the Act), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of month during the previous year, shall deduct an amount equal to five per cent. of such income as income-tax thereon.
  • In order to reduce the compliance burden, it is further proposed that the deductor shall not be required to obtain tax deduction account number (TAN) as per section 203A of the Act.
  • It is also proposed that the deductor shall be liable to deduct tax only once in a previous year.
  • This amendment will take effect from 1st June, 2017.

Shifting base year from 1981 to 2001 for computation of capital gains

Section 55 of the Act so as to provide that the cost of acquisition of an asset acquired before 01.04.2001 shall be allowed to be taken as fair market value as on 1st April, 2001 and the cost of improvement shall include only those capital expenses which are incurred after 01.04.2001

Consequential amendment is also proposed in section 48 so as to align the provisions relating to cost inflation index to the proposed base year.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

Expanding the scope of long term bonds under 54EC

For sectors which may raise fund by issue of bonds eligible for exemption under section 54EC, it is proposed to amend section 54EC so as to provide that investment in any bond redeemable after three years which has been notified by the Central Government in this behalf shall also be eligible for exemption.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

Extension of eligible period of concessional tax rate on interest in case of External Commercial Borrowing and Extension of benefit to Rupee Denominated Bonds

Amendment to Section 194LC

  • To provide that the concessional rate of five per cent. TDS on interest payment under this section will now be available in respect of borrowings made before the 1st July, 2020.
  • This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.
  • In order to give effect to the above, it is further proposed to extend the benefit of section 194LC to rupee denominated bond issued outside India before the 1st July, 2020.
  • This amendment will take effect retrospectively from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years.

Extension of eligible period of concessional tax rate under section 194LD

Amendment to section 194LD

  • To provide that the concessional rate of five per cent. TDS on interest will now be available on interest payable before the 1st July, 2020.
  • This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

Carry forward and set off of loss in case of certain companies.

Amendment to Section 79 of the Act

To provide that where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested and being an eligible start-up as referred to in section 80 -IAC of this Act, loss shall be carried forward and set off against the income of the previous year, if all the shareholders of such company which held shares carrying voting power on the last day of the year or years in which the loss was incurred, being the loss incurred during the period of seven years beginning from the year in which such company is incorporated, continue to hold those shares on the last day of such previous year.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

​​Rationalization of Provisions relating to tax credit for Minimum Alternate Tax and Alternate Minimum Tax

Section 115JAA

With a view to provide relief to the assessees paying MAT, it is proposed to amend section 115JAA to provide that the tax credit determined under this section can be carried forward up to fifteenth assessment years immediately succeeding the assessment years in which such tax credit becomes allowable. Further, similar amendment is proposed in section 115JD so as to allow carry forward of Alternate Minimum Tax (AMT) paid under section 115JC upto fifteenth assessment years in case of non-corporate assessee.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

Measures to discourage cash transactions

Amendment to Sec 40A(3)

In order to disincentivise cash transactions, it is proposed to amend the provision of section 40A of the Act to provide the following:

To reduce the existing threshold of cash payment to a person from twenty thousand rupees to ten thousand rupees in a single day; i.e any payment in cash above ten thousand rupees to a person in a day, shall not be allowed as deduction in computation of Income from "Profits and gains of business or profession";

Deeming a payment as profits and gains of business of profession if the expenditure is incurred in a particular year but the cash payment is made in any subsequent year of a sum exceeding ten thousand rupees to a person in a single day;

Further expand the specified mode of payment under respective sub-section of section 40A from an account payee cheque drawn on a bank or account payee bank draft to by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018- 19 and subsequent years.

Restriction on cash transactions

New Section 269ST

In order to achieve the mission of the Government to move towards a less cash economy to reduce generation and circulation of black money, it is proposed to insert section 269ST in the Act to provide that no person shall receive an amount of three 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.

Transactions of the nature referred to in section 269SS are proposed to be excluded from the scope of the said section.

Penalty under section 271DA

To provide for levy of penalty on a person who receives a sum in contravention of the provisions of the proposed section 269ST. The penalty is proposed to be a sum equal to the amount of such receipt.

Section 206C

It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. of sale consideration on cash sale of jewellery exceeding five lakh rupees.

These amendments will take effect from 1st April, 2017.

Enabling of Filing of Form 15G/15H for commission payments specified under section 194D

Amendment in Section 197A

In the case of Individuals and HUFs, it is proposed to amend section 197A so as to make them eligible for filing self-declaration in Form.No.15G/15H for non-deduction of tax at source in respect insurance commission referred to in section 194D.

This amendment will take effect from 1st June, 2017.

Increasing the threshold limit for maintenance of books of accounts in case of Individuals and Hindu undivided family

Amendment to Section 44AA

To increase monetary limits of income and total sales or turn over or gross receipts, etc specified in said clauses for maintenance of books of accounts from 120,000 to 250,000 rupees and from 1,000,000 rupees to 2,500,000 rupees, respectively in the case of Individuals and Hindu undivided family carrying on business or profession.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years.

Exclusion of certain specified person from requirement of audit of accounts under section 44AB

Amendment to Section 44AB

To exclude the eligible person, who declares profits for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, total turnover or gross receipts, as the case may be, in business does not exceed 2 crore rupees in such previous year, from requirement of audit of books of accounts under section 44AB.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.

Simplification of the provisions of tax deduction at source in case Fees for professional or technical services under section 194J

Amendment to Section 194J

  • To reduce the rate of deduction of tax at source to two per cent from ten per cent. in case of payments received or credited to a payee, being a person engaged only in the business of operation of call center.
  • This amendment will take effect from the 1st day of June, 2017.

Scope of section 92BA of the Income-tax Act relating to Specified Domestic Transactions

Amendment to section 92BA

it is proposed to provide that expenditure in respect of which payment has been made by the assessee to a person referred to in under section 40A(2)(b) are to be excluded from the scope of section 92BA of the Act. Accordingly, it is also proposed to make a consequential amendment in section 40(A)(2)(b) of the Act.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.

Processing of return within the prescribed time and enable withholding of refund in certain cases

New Section 241A

In order to address the grievance of delay in issuance of refund in genuine cases which are routinely selected for scrutiny assessment, it is proposed that provisions of section 143(1D) shall cease to apply in respect of returns furnished for assessment year 2017-18 and onwards

To provide that, for the returns furnished for assessment year commencing on or after 1st April, 2017, where refund of any amount becomes due to the assessee under section 143(1) and the Assessing Officer is of the opinion that grant of refund may adversely affect the recovery of revenue, he may, for the reasons recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, withhold the refund upto the date on which the assessment is made.

These amendments will take effect from 1st April, 2017 and will, accordingly, apply to returns furnished for assessment year 2017-18 and subsequent years.

Rationalization of time limits for completion of assessment, reassessment and re-computation and reducing the time for filing revised return

Amendment to Sec 143(1)

Time limit the time limit for making an assessment order under sections 143 or 144 shall be reduced from existing 21 months to 18 months from the end of the assessment year, and for the assessment year 2019-20 and onwards, the said time limit shall be 12 months from the end of the assessment year in which the income was first assessable

Amendment to Sec 143(2)

Time limit for making an order of assessment, reassessment or re- computation under section 147, in respect of notices served under section 148 on or after the 1st day of April, 2019 shall be twelve months from the end of the financial year in which notice under section 148 is served.

Amendment to Sec 143(3)

Time limit for making an order of fresh assessment in pursuance of an order passed or received in the financial year 2019-20 and onwards under sections 254 or 263 or 264 shall be 12 months from the end of the financial year in which order under section 254 is received or order under section 263 or 264 is passed by the authority referred therein.

These amendments will take effect from 1st April, 2017.

Mandatory furnishing of return by certain exempt entities

Amendment to Sec 139(4)

any person as referred to in clause (23AAA), Investor Protection Fund referred to in clause (23EC) or clause (23ED), Core Settlement Guarantee Fund referred to in clause (23EE) and any Board or Authority referred to in clause (29A) of section 10 shall also be mandatorily required to furnish a return of income.

This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years.

Fee for delayed filing of return

Insertion of Section 234F

To provide that a fee for delay in furnishing of return shall be levied for assessment year 2018-19 and onwards in a case where the return is not filed within the due dates specified for filing of return under sub-section (1) of section 139. The proposed fee structure is as follows:—

(i) a fee of 5000 rupees shall be payable, if the return is furnished after the due date but on or before the 31st day of December of the assessment year;
(ii) a fee of 10000 rupees shall be payable in any other case.

However, in a case where the total income does not exceed five lakh rupees, it is proposed that the fee amount shall not exceed one thousand rupees.

These amendments will take effect from lst April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years.

Penalty on professionals for furnishing incorrect information in statutory report or certificate

Insertion of Section 271J

Person furnishing report or certificate undertakes due diligence before making such certification, it is proposed to insert a new section 271J so as to provide that if an accountant or a merchant banker or a registered valuer, furnishes incorrect information in a report or certificate under any provisions of the Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) may direct him to pay a sum of ten thousand rupees for each such report or certificate by way of penalty.

These amendments will take effect from 1st April, 2017.

Rationalization of rebate allowable under Section 87A

  • Maximum amount of rebate reduced to Rs 2500
  • to provide that this rebate shall be available to only resident individuals whose total income does not exceed Rs. 3,50,000.
  • This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years

Restriction on set-off of loss from House property

Amendment to Section 71(3A)

To provide that set-off of loss under the head "Income from house property" against any other head of income shall be restricted to two lakh rupees for any assessment year. However, the unabsorbed loss shall be allowed to be carried forward for set-off in subsequent years in accordance with the existing provisions of the Act.

This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to assessment year 2018-19 and subsequent years.

Rationalization of deduction under section 80CCD for self-employed individual

Amendment to Section 80CCD

2018-19 and subsequent years' assessment year 2018 and, will accordingly, apply in relation to April, This amendment will take effect from 1st

In order to provide parity between an individual who is an employee and an individual who is self-employed, it is proposed to amend section 80CCD so as to increase the upper limit of ten per cent of gross total income to twenty per cent in case of individual other than employee.


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