A GLANCE AT CA R. K. VYAS CA C.R. CHANDAK

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Debra Hawkins
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1 FOR PRIVATE CIRCULATION ONLY A GLANCE AT BUDGET PROPOSALS CA R. K. VYAS CA C.R. CHANDAK VPC & ASSOCIATES, Chartered Accountants MERCANTILE BUILDING, BLOCK E, 4 TH FLOOR 9/12, LAL BAZAR STREET, KOLKATA PHONE: / vpc@vpcassociates.com, rkv@vpcassociates.com crc@vpcassociates.com

2 Economic Analysis of the Union Budget Proposals This is the 4th consecu ve Budget of Shri Arun Jaitley and is consistently a Growth Oriented and Job Oriented Budget for building Transformed, Energized and Clean India. He has been able to maintain stability on all the economic fronts with an infla on rate which is below 5%; Fiscal deficit target of 3.2%, Current account deficit below 1% with stable exchange rate. There has been an increase in the growth of Agriculture from 1.2 % in to about 4.1% in the current Fiscal Year despite the challenges of demone za on and an overall GDP growth of about 6.5% with a growth target of about 7.5% in the fiscal year The small decline in GDP in the current year is for a be er gain in future year with the cleansing of the economy from the circula on of the counterfeit currency, the curbing of the black money circula on and with a posi ve move towards cashless economic transac ons. Pump priming is the core of the budget proposals with more public investment as there has been a con nuous sluggishness in the private investment and poor lending by the banking sector for the vicious problem of the NPAs built over the period in the past. The Finance Minister could have brought some dras c policy solu on to solve this problem as the banks are also suffering from the capital adequacy norms for their er three capital requirements. This is very important area for solving liquidity problem as without the relief to the NPAs, the economy cannot come back to the growth path and the private sector investment in manufacturing sector is very important for crea ng employment and also to make this sector compe ve against import of industrial and consumer goods in the country. The pump priming efforts is likely to boost investment which will have the mul plier effect and will create lot of new jobs and further the growth in the industrial sector which has been stagnant and declining for the past few years. The budget proposals will provide more boost to Medium and Small Enterprises (MSME) with reduc on in corporate tax rate from 30% to 25% for turnover up to ` 50 crore. The Housing sector will get a further boost with tax exemp on for small housing projects by an almost 30% increase in the built up area as the effec ve area will be carpet area of 30 sq. meter in Metro City and up to 60 sq. meter in other places. The Finance Minister has announced several tax benefits for the cash-less transac ons for making a digital India, which will curb black money and increase the total tax revenue and also increase the Tax-GDP ra o in the country. Similarly the Startup India ini a ve will get further benefit with more flexibility in their tax exemp on. The Finance Minister has announced an increase of more than 30% in the capital expenditure for increase in investments in road & rail and increase in infrastructure spending to ` 3,96,135 crore will help to enhance economic growth. He has been able to reduce the government borrowing from ` 4.25 lakh crore to ` 3.48 ( 1 )

3 lakh crore and thereby also reducing the revenue deficit from 2.3% to 2.1% by keeping his commitment for be er fiscal discipline. The commitment for building one crore houses for poor people by 2019 and increase in aggregate pending for agricultural sector to ` 10 lakh crore will also bring social jus ce and development of the rural sector and the benefits of growth will reach to the common people and the rural people, and thereby development for all. ( 2 )

4 1. BASIC EXEMPTION There is no Change in the Basic Exemp on Limits. The Present limits are : i) For Individuals /HUFs & AOP ` 2,50,000 ii) For Senior Ci zens (Aged 60 years or more but below 80 years) ` 3,00,000 iii) For Very Senior Ci zens (Aged 80 years or more) ` 5,00, TAX RATES Highlights of Direct Tax Proposals (To be effective from Assessment Year unless otherwise specified) (a) There is no change in the Rates of Income Tax for Individuals/HUF, etc. except where total Income is up to ` 5 Lakhs. The limits and slab-rates are : Educa on 3% will con nue to be leived as per last year. (b) For Individuals / For Senior Ci zens For Very Senior Ci zens HUFs / AOP (Aged 60 years but below 80 years) (Aged 80 years or more) Income Slab Tax Income Slab Tax Income Slab Tax Rate Rate Rate Upto ` 2,50,000/- NIL Upto ` 3,00,000/- NIL Upto ` 5,00,000/- NIL From ` 2,50,001/- From ` 3,00,001/- to ` 5,00,000/- 5% to ` 5,00,000/- 5% From ` 5,00,001/- to ` 10,00,000/- 20% Above ` 10,00,000/- 30% Corporate Tax Domes c Companies have been categorised in two classes for rate purpose as under: - (i) Companies having turnover not exceeding ` 50 crores in the financial year ended 31st March, 2016 will be subject to tax 25%. (ii) For other companies the tax rate 30%. Educa on 3% will con nue to be leived as per last year. (c) Surcharge - The rate of Surcharge has been ra onalised as follows : (i) For Individual / HUF/ BOI (a) Where income lies between ` 50 Lacs and `1 Crore, has been levied newly. (b) where income exceeds ` 1 crore, surcharge will con nue to ( 3 )

5 (ii) For a Firm where income exceeds ` 1 crore, the surcharge will con nue to be 12%. (iii) 3. TAX REBATE For Domes c Company, where income exceeds ` 1 crore but within ` 10 crore, the surcharge will con nue to 7%.; where income exceeds ` 10 crore, surcharge will con nue to 12%. Tax Rebate to Individual assessee u/s 87A is reduced to ` 2,500/- from the present limit of ` 5,000/- and will be available only where income does not exceed ` 3,50,000/-. 4. ADVANCE TAX Eligible Assessees having income from profession u/s. 44ADA are now permi ed to pay whole amount of Advance Tax by 15th March of the financial year. This provision is on the lines of advance tax payable for eligible business assessees u/s. 44AD. 5. FEE FOR LATE FILING OF RETURN OF INCOME A fee for delay in furnishing of return of income shall be levied for Asst. year and onwards in case where the return is not filed within due date specified u/s 139(1). The fee structure is : (a) If the return is filed a er due date but on or before 31st December of the Asst. year ` 5,000/- (b) In any other case - ` 10,000/- However, in case where the total income does not exceed ` 5 Lacs, the fee for late filing will not exceed ` 1,000/-. 6. PRESUMPTIVE TAXATION A Six per cent presump ve tax rate on turnover/gross receipts where payment is received through banking channels will be applied to small business with turnover not exceeding ` 2 Crores u/s. 44AD. This will result in reduc on of tax rate by 25% on non-cash transac ons, when compared with the exis ng presump ve rate of 8%. 7. CASH PAYMENTS (a) (b) (c) At present cash payments for revenue expenditure in excess of ` 20,000/- are disallowed u/s 40A(3). This limit has been reduced to ` 10,000/-. However, exis ng monetary limit for transporta on charges con nues to be ` 35,000/-. The above disallowance has been extended to certain categories of Capital Expenditure incurred in cash in excess of ` 10,000/-. Now deprecia on on such por on of cash payments exceeding ` 10,000/- will not be considered for cost u/s 43(1). No person shall receive in cash an amount of ` 3 lakh or more in aggregate from a person in a day or in respect of a single transac on or in respect of transac ons rela ng to one event or occasion from a person. In effect, cash receipts from a person for one event or occasion cannot exceed ` 3 lakh either in a single or in number of days. Exempt Category (to be no fied by CBDT) : 1) Government Companies 2) Banking Companies ( 4 )

6 (d) 3) Post Office Saving Bank 4) Sale of agricultural produce by a person being an individual or HUF and in whose head such receipts are agricultural income. Cash receipt in excess of ` 3 lakhs, will a ract penalty equal to the amount of such receipt. However, in case of reasonable cause, no penalty shall be imposed. The penalty is to be imposed by Joint Commissioner. 8. SET OF LOSS UNDER HOUSE PROPERTY INCOME Sec on 71 of the Act presently permits set off of loss under house property head with income under any other head in the same year. Now, it has been proposed to impose a limit of ` 2 lacs only for the set off of loss from House Property head from any other head of income in a year. The excess loss (a er se ng of above ` 2 lacs) is allowed to be carried forward for future set off in subsequent years upto 8 Asst. Years. Such carried forward house property loss can be set off only from income from House Property only, in view of sec on 71B. 9. CAPITAL GAIN / REAL ESTATE DEVELOPMENT Hitherto in case of real estate development agreement, controversy used to arise as to the year of chargeability of Capital gain. It has been proposed to rest this issue vide new Sec on 45(5A) of the Act. Now, in case of Individual/HUF being owner of any Land or Building or both, if any development agreement is entered by them with another person the capital gain shall be charged in the year of issue of comple on cer ficate received for whole or part of the property. The calcula on of capital gain tax in the hands of Individual/HUF would be on the basis of full value of considera on which would be stamp duty valua on of his por on of land or building or both as on the date of issue of above cer ficate plus considera ons received in cash, if any. However, if such individual/huf transfers his share of project before the issue of such comple on cer ficate, the capital gain will arise in the year of transfer itself as per exis ng provisions of the Act. The above amendments are for individual/huf assessees only. For other assessee the issue remains open. Sec on 49 of the Act has also been amended for determina on of the cost of acquisi on of that share of land/building in the project, if the Individual/HUF transfer it later on. The cost shall be the amount which is deemed to be the full value of considera on as stated in Sec on 45(5A). 10. LONG TERM CAPITAL GAIN & SECURITIES TRANSACTION TAX STT Long term capital gain arising from transfer of equity shares or a unit of equity oriented mutual fund is exempt, if the sale transac on is subject to STT. Now, it is proposed to amend Sec. 10(38) to provide that exemp on under this Sec on for income arising on transfer of equity shares acquired on or a er1st October, 2004 shall be available only, if the acquision of shares is chargeable to STT. However, shares acquired/alloted in IPO, FPO, Bonus or Right Issues etc. will be exempt from this levy of tax. 11. INCOME BY WAY OF DIVIDEND At present income by way of dividend from domes c companies beyond rupees ten lakh is chargeable to 10% on gross basis in case of a resident Individual, HUF or Firm. Now Sec. 115 BBDA is being amended to provide that the above chargeability is extended to all resident assessees except domes c company, certain mutual funds, charitabe trusts or ins tu ons etc. Hence all private trusts or AOP will now be covered under above tax-net. ( 5 )

7 12. NOTIONAL TAX ON UNSOLD REAL ESTATE INVENTORY No onal Tax will be charged as House Property income on unsold inventory a er one year from comple on, implying that it could have otherwise been taxable. This may lead to li ga on as most real estate players adopt a non-tax posi on on stock-in-trade (Sec 23(5)). 13. AFFORDABLE HOUSING PROJECT The affordable housing scheme in the hands of Developers enjoy 100 % deduc on on profits. The me limit for the comple on of the project has been extended from three years to five years. The restric on on size of flat from built-up area of 30 sq. meter for metro ci es and 60 sq. meter for non-metro ci es has been replaced by the Carpet area. The restric on of 25 KM from the municipal limit has also been removed (Sec 80-IBA) 14. CAPITAL GAIN IMMOVABLE PROPERTY The holding period for trea ng immovable property being land or building as long-term has been reduced from three years to two years. 15. CAPITAL GAIN COST INFLATION INDEX The base year for aplying Cost Infla on Index for long term Capital Gain has been advanced to 1st April, 2001 from 1st April, TRUST (a) (b) (c) (d) (e) (f) Corpus dona ons by a Trust registered u/s 12A/12AA and Ins tu ons under sec on 10 (23C) to any trust or ins tu on registered under Sec 12A/12AA/10(23C) shall not be treated as applica on of income for objects of such trust/ins tu ons etc. Exis ng registered trust/ ins tu ons u/s 12A/12AA shall make a fresh applica on within 30 days for fresh registra on in the prescribed form and manner, if it has adopted or undertaken modifica on of the objects, which do not conform to the condi ons of earlier registra on. Trust/ Ins tu on registered u/s 12A/12AA shall furnish the return of income u/s 139 (4A) within the due date specified u/s 139 (1). Cost of acquisi on of an asset (being the asset held by a trust/ ins tu on in respect of which accreted income has been computed and tax paid thereon under chapter XII EB for compu ng the capital gain shall be deemed to be the fair market value of the assets which has been taken into account for computa on of accreted income as on the specified date u/s 115TD (2) The limit of dona on of cash has been reduced from ` 10,000/- to ` 2,000/- for donor for claiming deduc on u/s 80G. Survey may be conducted at a place where charitable ac vi es are carried on. 17. SALE OF UNQUOTED SHARE A new sec on 50 CA has been proposed to be inserted. This is in connec on with sale/ transfer of unquoted share of a company being capital asset by any assessee. In such Case where considera on received or accruing is less than the fair market value (to be determined in accordance with prescribed method), such Fair Market Value would be taken as Fair Value of considera on for compu ng Capital Gain Tax. This provision will not apply where shares are held as Stock-in-trade. ( 6 )

8 18. MINIMUM ALTERNATIVE TAX (A) (B) Amendments are proposed to the MAT provisions to synchronise them with Indian Accoun ng Standards (IND-AS). With IND-AS bringing in a paradigm shi in how companies maintain their accounts, this clarity on MAT treatment will add to the government s tax-friendly approach. IND- AS are applicable to quoted companies and specified companies. The tax credit determined u/s. 115JAA can be carried forward upto fi eenth assessment years (against ten years) immediately succeeding the assessment year in which such tax credit becomes allowable. 19. SEARCH & SEIZURE (A) At present no ce for Assessments /Reassessments, in case of Search & Seizure opera on cannot be issued for an Assessment Year/Years beyond the Sixth Assessment Year. Now it is proposed that such no ces can be issued upto 10th (Tenth) Assessment Year if the Assessing Officer has in his possession books of accounts or other documents which reveals that :- (a) escapement of income amoun ng to ` 50 (Fi y Lacs) in aggregate has taken place in one or more year beyond the sixth year and (b) such income is represented by an asset. This provision will apply for SEARCHES taking place on or a er 1/04/2017. (B) (C) Power of provisional a achment - The authorized officer with prior approval of competent authority for protec ng the interest of revenue may a ach provisionally any property belonging to the assessee. Such a achment shall cease to have effect a er the expiry of six months from the date of such a achment. Time Limit for Comple on of Search Assessment - Assessment for Search & Seizure cases conducted in the F.Y , the me limit for making an assessment u/s 153A now reduced from exis ng 21 (Twenty-One) months to 18 (Eighteen) months from the end of financial year in which last authorisa on of search was issued. For searches conducted in F.Y and onward the said me limit shall further be reduced to twelve months. 20. TAX DEDUCTED AT SOURCE (A) On Rent (U/s 194-IB) Now Individual and HUF (not liable for Tax Audit) paying rent exceeding ` 50,000/- per month or part of month will have to deduct 5% on such amount of rent paid. Such TDS is to be made out of rent for the last month of the year or last month of the tenancy (if vacated). Such deductor is not required to obtain the TAN no and the deduc on has to be made only once in a year, i.e. out of last month rent only. [w.e.f 01/06/2017] (B) On payment under specified agreements (U/s 194-IC) newly inserted Any person responsible for paying to a resident, any sum by way of considera on (not in kind) under the Joint Development agreement (sec 45(5A)) shall deduct 10% on such sum credited or paid. [w.e.f 01/04/2018] (C) On Professional Fees (U/s 194J) In case of professional engaged in the opera on of Call centre, the rate of TDS has been reduced from 10% to 2%. [w.e.f ] (D) Filing of Declara on for non-deduc on of TDS [Sec 197A] Person other than company and firm and including senior ci zen en tled to receive commission from insurance business (as applicable u/s 194D) can file self-declara on in prescribed form for non-deduc on of TDS, if tax on es mated total income is nil. ( 7 )

9 21. TAX COLLECTED AT SOURCE (A) On Cash sale exceeding ` 2 Lakhs/ ` 5 lakhs [Sec 206 (ID)]. 1 % on cash sale of Jewellery exceeding ` 5 Lakhs has been omi ed. However, 1 % on cash sale of bullion and any other goods con nue to remain and it seems that any other goods will cover Jewellery and 1% will be a racted of cash sale exceeding ` 2 lakhs of jewellery. (B) Now 1 % on sale of motor vehicle exceeding ` 10 Lakhs shall not apply on sale of vehicles to Central Govt., State Govt., Embassy, High Commission, Consulate, Trade Representa ve of Foreign State, Local Authority, Public Sector Co engaged in business of carrying passenger. (C) Mandatory Men on of PAN and Rate of TCS in case of non-availability of PAN [Sec 206CC]. The Collectee (from whom TCS to be collected) shall compulsorily men on its PAN on all bills, correspondences. In case of non-availability of the PAN, TCS at twice the rate specified in relevant provision 5% whichever is higher will be applicable. 22. TIME LIMITS FOR COMPLETION OF ASSESSMENT OR REASSESSMENTS (A) Original Assessments Under the exis ng provision of Sec 153 the me limit for assessment is 21 months form the end of the relevant assessment year. This me limit from the assessment year shall be reduced from twenty-one month to eighteen month for the end of the relevant assessment year. From assessment year onward, the me limit shall further be reduced to 12 months. (B) Reassessments The me limit for making an order of reassessment u/s 147 shall be twelve months from the end of the financial year in which the no ce u/s 148 is served. The present me limit of 9 months now extended to 12 months from the end of the F.Y in which the no ce u/s 148 was served. (C) Fresh assessments u/s 254 or 263 The me limit for making an order of fresh assessment in pursuance of an order received in F.Y and onwards, like u/s 254 or u/s 263 or 264, shall be 12 months from the end of Financial year in which such order are received. The present me limit of 9 months will stand extended to 12 months. (D) Time limit for filing revised return u/s. 139(5) The me limit for furnishing a revised return shall be available upto the end of the relevant assessment year or before the comple on of assessment year whichever is earlier. At present the return can be revised before the expiry of one year from the end of the relevant assessment year or before the comple on of assessment whichever is earlier. Prac cally the period is curtailed by one year. 23. Penalty for Incorrect Informa on A penalty of ` 10,000/- may be imposed by the Assessing officer or the Commissioner(Appeals) on a chartered Accountant, Merchant Banker, Registered Valuer on furnishing incorrect informa on in report or cer ficate issued under any provisions of Income Tax Act and Rules (Sec. 271J). Disclaimer Informa on in this publica on is intended to provide only a general outline of the subjects covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor should it be used in place of professional advice. M/s VPC & Associates accepts no responsibility for loss arising from any ac on taken or not taken by anyone using this publica on. ( 8 )

Total turnover/ Gross receipts 30% 30% of FY > Rs 50 Cr No change in rate of Surcharge

Total turnover/ Gross receipts 30% 30% of FY > Rs 50 Cr No change in rate of Surcharge 1. Income Tax Rates: Category of Income New rate of tax Old rate Taxpayer for FY 2017-18 of tax Individuals/ Upto Rs 2.5 L Nil Nil HUF/ BOI/ Rs 2.5 to 5 L 5% 10% AOP/ Rs 5 to 10 L 20% 20% Artificial Above