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Amendments proposed in Direct Tax Regime 

Individual/HUF Slab Rate






Income

Rate of Tax

   

Upto 2.5 lakh*

Nil

2.5 Lakh to 5 lakh

5%

5 Lakh to 10 lakh

20%

Above 10 Lakh

30%


* Rs. 3 Lakh in case of Senior Citizen, Rs. 5 Lakh in case of Super Senior Citizen                                       

Provisions of the Act

(i) in the case of every individual [other than those specifically mentioned in sub-paras (ii) and (iii)] or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which any other Paragraph of this Part applies:-    

  • Up to Rs. 2,50,000 - Nil
  • Rs. 2,50,001 to Rs. 5,00,000 - 5 per cent.
  • Rs. 5,00,001 to Rs. 10,00,000 - 20 percent.
  • Above Rs. 10,00,000 - 30 per cent.;

(ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than the age of eighty years at any time during the previous year:-

  • Up to Rs. 3,00,000 - Nil
  • Rs. 3,00,001 to Rs. 5,00,000 - 5 per cent.              
  • Rs. 5,00,001 to Rs. 10,00,000 - 20 per cent.
  • Above Rs. 10,00,000 - 30 per cent.;

(iii)In the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year:-                                                                     

  • Up to Rs. 5,00,000 - Nil
  • Rs. 5,00,001 to Rs. 10,00,000 - 20 per cent.          
  • Above Rs. 10,00,000 - 30 per cent.

Surcharge in case of Individual/HUF


Slab

Rate of Surcharge

Total Income Rs.50 lakh to

10%

Rs. 1 Crore

 

Above Rs.1 crore

15%


Provisions of the Act

The surcharge in cases of persons referred to in this paragraph, having total income above fifty lakh but not above one crore rupees, shall be levied at the rate of ten per cent. In cases of persons referred to in this paragraph, having total income above one crore rupees, surcharge shall be levied at the rate of fifteen per cent. Marginal relief will be provided.

Section 87A

The amount of rebate is reduced to Rs. 2500/- from Rs. 5000/- if the total income does not exceed Rs. 3,50,000/-

Provisions of the Act

In section 87A of the Income-tax Act, with effect from the 1st day of April, 2018, - (a) for the words “five hundred thousand rupees”, the words “three hundred fifty thousand rupees” shall be substituted; (b) for the words “five thousand rupees” [as substituted by section 46 of the Finance Act, 2016], the words “two thousand five hundred rupees” shall be substitute

  • A simple one-page form to be filed as Income Tax Return for the category of individuals having taxable income upto Rs. 5 lakhs other than business income.
  • A person of this category who files income tax return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding any high value transaction

Budget Speech

In order to expand tax net, I also plan to have a simple one-page form to be filed as Income Tax Return for the category of individuals having taxable income upto `5 lakhs other than business income. Also a person of this category who files income tax return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high value transaction.

Individuals & HUF to deduct 5% TDS on payment of Rent above Rs. 50,000/- per month even if not subject to Tax Audit. But they are exempt from the provisions of Section 203A for the application of TAN.

Provisions of the Act

 After section 194-IA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2017, namely:-

194-IB. (1) Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I), responsible for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of a month during the previous year, shall deduct an amount equal to five per cent. of such income as income-tax thereon.

(2) The income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

(4) In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

Explanation.-

For the purposes of this section, "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.

Loss in excess of Rs. 2 lakh under House property cannot be set off against any other head of income but can be carried forward.

Provisions of the Act

In section 71 of the Income-tax Act, after sub-section (3), the following sub-section shall be inserted with effect from the 1st day of April, 2018, namely: -

‘(3A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income under the other head.

  • Late filing fee of Rs. 5000/- till 31st December of the Assessment year and Rs. 10000/-will be charged after that date for delay in filing the Income Tax return.
  • It is also proposed to amend the section 140A to include that in case of delay in furnishing of return of income, along with the tax and interest payable as aforesaid, fee for delay in furnishing of return of income shall also be payable before filing return of income.

Provisions of the Act

“234F. (1) Without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139, fails to do so within the time prescribed in sub-section (1) of said section, he shall pay, by way of fee, a sum of,- (a) five thousand rupees, if the return is furnished on or before the 31st day of December of the assessment year; (b) ten thousand rupees in any other case: Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

(2) The provisions of this section shall apply in respect of return of income required to be furnished for the assessment year commencing on or after the 1st day of April, 2018.”

No expenditure would be allowed under Income from Other Sources if TDS is not deducted on such income.

Provisions of the Act

It is proposed to amend sub-section (1A) of the said section so as to provide that the provisions of sub-clause (ia) of clause (a) of section 40 shall also apply in computing the income chargeable under the head "Income from other sources" as they apply in computing the income chargeable under the head "Profit and gains of business or profession".

The time period for revising a tax return is being reduced to 12 months from completion of financial year.

Provisions of the Act

Sub-section (5) of the said section 139 provides that a person can furnish a revised return, in case he discovers any omission or wrong statement in his return of income already furnished, within one year from the end of the relevant assessment year or before completion of assessment, whichever is earlier.

It is proposed to amend the said sub-section (5) so as to provide that the time for furnishing of revised return shall be available upto the end of the relevant assessment year or before the completion of assessment, whichever is earlier.

The time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and thereafter     

Provisions of the Act

It is proposed to amend sub-section (1) of the said section to provide that for the assessment year 2018-2019, the time limit for making an assessment order under section 143 or 144 shall be reduced from existing twenty-one months to eighteen months from the end of the assessment year, and for the assessment year 2019-2020 and onwards, the said time-limit shall be twelve months from the end of the assessment year in which the income was first assessable.

It is further proposed to amend sub-section (2) of the said section to provide that the 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 was served. It is also proposed to amend sub-section (3) of the said section to provide that the time-limit for making an order of fresh assessment in pursuance of an order passed or received in the financial year 2019-2020 and onwards under section 254 or 263 or 264 shall be twelve 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.

To maintain confidentiality and sensitivity of the proceeding of search or the requisition made under section 132A, a new explanation is proposed to be inserted to provide that the reason to believe recorded by the Income tax Authority to initiate proceedings shall not be disclosed to any person or any authority or the appellate tribunal.

Such reasons, however, may have to be placed before the court in the event belief of the authorized official is challenged, in which event the court would be entitled to examine the relevance of the reasons for the formation of the belief.

Provisions of the Act

Clause 50 of the Bill seeks to amend section 132 of the Income-tax Act relating to search and seizure. Sub-section (1) of the said section provides that where an income-tax authority mentioned therein, based on the information in his possession, has reason to believe of circumstances specified therein, he may authorize an authority specified therein to carry out search and seizure. It is proposed to insert an Explanation after the fourth proviso to the said sub-section (1) so as to provide that the reason to believe recorded by the income-tax authority specified therein under the said sub-section shall not be disclosed to any person or any authority or the Appellate Tribunal. This amendment will take effect retrospectively from 1st , April, 1962, the date of commencement of the Income-tax Act, 1961.

MAT Credit allowed to be carried forward for upto a period of 15 years instead of 10 years at present.    

Provisions of the Act

It is proposed to amend the said sub-sections so as to provide that where the amount of tax credit in respect of any income-tax paid in any country or specified territory outside India allowed against the alternate minimum tax payable exceeds the amount of tax credit admissible against the regular income-tax payable by the assessee on his income in accordance with the other provisions of this Act, such excess amount shall be ignored, while computing the amount of credit and the period for carry forward of tax credit shall be extended from tenth assessment year to fifteenth assessment year.

Tax at 6% of the presumptive income for turnover upto Rs. 2 crores, if money is received by non-cash means.

Provisions of the Act

It is proposed to insert a proviso to the said sub-section (1) so as to reduce the existing rate of deemed total income of eight per cent. to six per cent., in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year. However, the existing rate of deemed profit and gains of eight per cent  referred to in the provisions of the said section, shall continue to apply in respect of total turnover or gross receipts received in any other mode.

Wrong report/ certification by Chartered Accountants will lead to a penalty of Rs 10,000 by Assessing Officer or Commissioner of Income Tax (Appeals).

Provisions of the Act        

Clause 86 of the Bill seeks to insert a new section 271J in the Income-tax Act relating to penalty for furnishing incorrect information in reports or certificates. It is proposed 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), without prejudice to the provisions of the Income tax Act, may direct him to pay, by way of penalty, a sum of ten thousand rupees for each such report or certificate. It is also proposed to define the expressions of "accountant", "merchant banker" and "registered valuer".

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

Reduction in cash expenditure limit allowable as deduction, both for revenue as well as capital expenditure to Rs 10,000 from Rs 20,000.(For Transporters it is continued at Rs. 35,000)

Provisions of the Act

It is proposed to amend the sub-section (3) of 40A so as to provide that where the payments or aggregate of payments in a day to a person otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees in a day, no deduction shall be allowed under the said sub-section or, as the case may be, such payment shall be deemed to be the profits and gains of business or profession of the assessee.

It is proposed to insert a proviso before Explanation 1 of clause (1) of section 43 so as to provide that where the assessee incurs any expenditure for acquisition of any asset in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost.

No cash transaction above Rs. 3 Lakhs will be permitted.

Provisions of the Act

After section 269SS of the Income-tax Act, the following section shall be inserted, namely:- ‘269ST. No person shall receive an amount of three lakh rupees or more-

(a) in aggregate from a person in a day; or
(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 or an account payee bank draft or use of electronic clearing system through a bank account:

Provided that the provisions of this section shall not apply to-

(i) any receipt by-

(a) Government;
(b) any banking company, post office savings bank or co-operative bank;

(ii) transactions of the nature referred to in section 269SS;

(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

After section 271D of the Income-tax Act, the following section shall be inserted, namely:-

271DA. (1) If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt: Provided that no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

Increased Threshold limit for audit of business entities that opt for presumptive income scheme from Rs. 1 crore to Rs 2 crores. Similarly, the threshold for maintenance of books is being increased from turnover of Rs 10 lakhs to Rs 25 lakhs and cap for total income is increased from Rs. 1,20,000 to Rs. 2,50,000 in case of Individual and HUF.

Provisions of the Act

Section 44AB, inter alia, provides that every person carrying on business is required to get his accounts audited before a specified date, if the total sales, turn over or gross receipts in a previous year, as the case may be, exceed or exceeds one crore rupees. It is proposed to amend the said section so as to insert a new proviso to provide that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year.

It is proposed to amend sub-section (2) of the said section so as to provide that the monetary limits of income and total sales, turnover or gross receipts specified in clauses (i) and (ii) shall be enhanced from one lakh twenty thousand rupees to two lakh fifty thousand rupees and from ten lakh rupees to twenty-five lakh rupees, respectively, in the case of an individual and a Hindu undivided family.

Limit  of cash donation which can be received by a charitable trust is  being reduced from Rs 10,000 to Rs 2,000.

Provisions of the Act

In Section 80G of the Income-tax Act, in sub-section (5D), for the words “ten thousand rupees”, the words “two thousand rupees” shall be substituted with effect from the 1st day of April, 2018

Changes in Capital Gain Tax - Holding period for considering long term capital gain from immovable property i.e. land & building is reduced to 2 years from 3 years.

Provisions of the Act

It is proposed to amend the third proviso to the said clause so as to provide that in the case of an immovable property being land or building or both, the aforesaid period of holding shall be less than twenty-four months for it to be treated as short term capital asset

Rationalization of Provisions of Section 80-IBA to promote Affordable Housing

In order to promote the development of affordable housing sector, it is proposed to amend section 80-IBA so as to provide the following relaxations:   

  1. The size of residential unit shall be measured by taking into account the "carpet area" as defined in Real Estate (Regulation and Development) Act, 2016 and not the "built-up area".
  2.  The restriction of 30 square meters on the size of residential units shall not apply to the place located within a distance of 25 kms from the municipal limits of the Chennai, Delhi, Kolkata or Mumbai.
  3. The condition of period of completion of project for claiming deduction under this section shall be increased from existing three years to five years.

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

Provisions of the Act

the built-up area of the residential unit comprised in the housing project does not exceed-

(i) thirty square metres, where the project is located within the cities of Chennai, Delhi, Kolkata or Mumbai or within the distance, measured aerially, of twenty-five kilometres from the municipal limits of these cities; or

(ii) sixty square metres, where the project is located in any other place;

Special Provisions for Computation of Capital gain in case of Joint Development Agreement

Problem: - Capital gain is chargeable to tax in the year in which transfer takes place except in certain cases. 'Transfer' includes any arrangement where rights are handed over in execution of part performance of contract. In such scenario, execution of JDA between owner of immovable property and the developer triggers the capital gains tax liability in the hands of the owner in the year in which the agreement is executed for developing the projects. There were many issues on the interpretation of this section, to clarify on this issue and to reduce the hardship of paying tax in year of transfer, following amendments are proposed:-

  • Individual/HUF who enters into JDA, capital gains shall be chargeable to in year in which certificate of completion for the project is issued by the competent authority.
  • Stamp duty value of land owner’s share on the date of issuing of certificate of completion plus any monetary consideration received, if any, be full value of consideration.
  • Tax @10% to be deductible on payments made in above transaction
  • Assessee who Transfers the asset before the issue of completion certificate are excluded from this section and liability of TDS.
  • This section is applicable in case of Individual and HUF only.

Provisions of the Act

Clause 22 of the Bill seeks to amend section 45 of the Income-tax Act relating to Capital gains. Under the existing provisions of the said section, the Capital gains is chargeable in the year in which transfer takes place except in certain cases as provided in the said section. It is proposed to insert a new sub-section (5A) in the said section so as to provide that where the Capital gains arises to an assessee being an individual or Hindu undivided family, from the transfer of a Capital asset, being land or building or both, under a specified agreement, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. It is further proposed to provide that the stamp duty value of his share, being land or building or both, in the project on the date of issuing of said certificate as increased by consideration received in cash, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. It is also proposed to provide that the provisions of this sub-section shall not apply where the assessee transfers his share in the project to any other person on or before the date of issue of said certificate of completion and the capital gains shall be deemed to be the income of the previous year in which such transfer took place and the provisions of the Act, other than the provisions of this sub-section, shall apply for the determination of the full value of consideration received or accruing as a result of such transfer. It is also proposed to define the expressions "competent authority", "specified agreement" and "stamp duty value". This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.

The base year for indexation is shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property       

Provisions of the Act

It is also proposed to make consequential amendments to the said section so as to replace the reference of 1st day of April, 1981 with the 1st day of April, 2001.

In case of conversion of preference shares in to equity shares, period of holding of preference shares shall be included at the time of calculating capital gain in case of subsequent sale of Equity shares

Provisions of the Act         

In the case of a capital asset, being equity shares in a company, which becomes the property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, there shall be included the period for which the preference shares were held by the assessee;”

Exemption not allowed in case of offline acquisition of shares,

It is proposed to amend section 10(38) to provide that exemption under this section for income arising on transfer of equity share acquired or on after 01-10-2004 shall be available only if the acquisition of share is chargeable to STT. However, the exemption shall continue in genuine cases where the STT could not have been paid like acquisition of share in IPO, FPO, bonus or right issue by a listed company, acquisition by non-resident in accordance with FDI policy, etc.

Provisions of the Act      

“Provided also that nothing contained in this clause shall apply to any income arising from the transfer of a long-term capital asset, being an equity share in a company, if the transaction of acquisition, other than the acquisition notified by the Central Government in this behalf, of such equity share is entered into on or after the 1st day of October, 2004 and such transaction is not chargeable to securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.”;

Deferment of notional income for house property held as stock-in-trade

It is proposed to provide that where the house property held as stock-in-trade which is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period upto 1 year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.

Provisions of the Act

In section 23 of the Income-tax Act, after sub-section (4), the following sub-section shall be inserted with effect from the 1st day of April, 2018, namely:___ “(5) Where the property consisting of any building or land appurtenant thereto is held as stock-intrade and the property or any part of the property is not let during the whole or any part of the previous year, the annual value of such property or part of the property, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.”.

  • Exemption from TDS of 5% being deducted from commission payable to individual insurance agents subject to their filing a self-declaration that their income is below taxable limit.
  • Payment of advance tax in one installment instead of four for professional availing Presumptive taxation with receipt upto Rs. 50 lakhs p.a.

Provisions of the Act

Clause (b) of sub-section (1) of the said section provides that an eligible assessee engaged in an eligible business referred to in section 44AD is liable to pay advance tax in a single instalment on or before the 15th of March every financial year.

It is proposed to amend the said clause (b) so as to provide that the assessee who declares profits and gains in accordance with the provisions of sub-section (1) of section 44ADA, shall also be liable to pay advance tax in one instalment on or before the 15th of March every financial year.

  • Interest paid by company is in excess of 30% of EBITDA will not be allowed when borrowings are made from associated enterprise being a non resident but can be carried forward (Applicable only in case where Interest amount exceeds Rs. 1crore)

Provisions of the Act

Sub-section (1) of the said section seeks to provide that where an Indian company, or a permanent establishment of a foreign company in India being the borrower, pays interest or similar consideration exceeding one crore rupees which is deductible in computing income chargeable under the head "Profits and gains of business or profession" in respect of any debt issued by a non-resident, being an associated enterprise of such borrower, interest shall not be deductible in computation of income under the said head to the extent that it arises from excess interest, as specified in sub-section (2).

It is further proposed to provide that where the debt issued by a lender which is not associated but an associated enterprise either provides an implicit or explicit guarantee such lender or deposits a corresponding and matching amount of funds with the lender, such debt shall be deemed to have been issued by an associated enterprise.

Sub-section (2) of the said section seeks to provide that for the purposes of sub-section (1), the expression "excess interest" shall mean an amount of total interest paid or payable in excess of thirty per cent. of earnings before interest, taxes, depreciation, and amortisation of the borrower in the previous year or interest paid or payable to associated enterprises for that previous year, whichever is less.

5% tax exemption for domestic companies having turnover below Rs. 50 crores in FY 2015-16 i.e. corporate tax rate of 25% for AY 2018-19.

Provisions of the Act

Rates of Income Tax

In case of domestic company,-
Where its total turnover or the gross receipts in the previous year 2015-16 does not exceeds 50 Crores Rupees -  25 percent of the total income

TCS rate will doubled for transactions without quoting of PAN.

Provisions of the Act

Clause 72 of the Bill seeks to insert a new section 206CC After section 206CB of the Income-tax Act relating to requirement to furnish Permanent Account Number by collectee.

The proposed sub-section (1) of  the said section specifies that any person paying any sum or amount, on which tax is collectible at source under Chapter XVII BB (herein referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall be collected at twice the rate mentioned in the relevant section or at the rate of five per cent., whichever is higher.

  • MAT provisions will be amended suitably  to comply with IND AS for Calculation of  a  Books profit
  • Transfer pricing compliance relating to Specified Domestic Transactions has been reduced and restricted only if one of the related entity involved in related party transaction enjoys specified profit-linked deduction.

Provisions of the Act

It is proposed to amend the said section so as to omit clause (i) of the said section so as to exclude the expenditure

in respect of which payment has been made or to be made by the assessee to a person referred to in clause (b) of subsection

  (2) of section 40A, from the scope of section 92BA of the Income-tax Act.

Amendments Proposed in Indirect Tax Regime :

  • Exemption of Basic Customs duty, Excise/CV duty and SAD on miniaturized POS card reader for m-POS, micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners.
  • Goods and Services Tax: Not many changes in current regime of Excise & Service Tax because the same are to be replaced by GST soon.  
  • No big changes in the indirect taxes, given GST roll-out plan

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