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 Rs 10 L 30% 30% Juridical person Surcharge: Income from Rs 50L to 1 Cr 10% Nil Above Rs 1 Cr 15% 15% Domestic Total turnover/ Gross receipts 25% 30% Company of FY 2015-16 < Rs 50 Cr Total turnover/ Gross receipts 30% 30% of FY 2015-16 > Rs 50 Cr No change in rate of Surcharge Thus, some relief to Individuals having annual income less than Rs 50 lakhs and to small companies having total turnover/ gross receipts for FY 2015-16 less than Rs 50 Cr. 2. Measures for promoting Real Estate sector: Relaxation of conditions for claiming deduction u/s 80-IBA in respect of profits from developing and building certain housing projects Size of residential unit to be measured by "carpet area" and not "built-up area". Size of residential units not to exceed - 30 sq mts for the 4 metro cities (Chennai, Delhi, Kolkata or Mumbai) & 60 sq mts for all other places Time limit for completion of project - increased from 3 years to 5 years In case of immovable property, to qualify as long term capital asset, the period of holding is proposed to be reduced from the existing 36 months to 24 months. Shifting base year from 1981 to 2001 for computation of capital gains - it is proposed to amend Sec 55 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 01.04.2001. Thus, appreciation in the value of capital asset from the date of acquisition till 01.04.2001 would not be liable to tax. Sub-section 5A inserted in Sec 45 to provide for computation of capital gains in case of Joint Development Agreement (JDA) Capital gains taxable in the year in which the certificate of completion for the whole or part of the project is issued by the competent authority; Stamp duty value of the land as on the date of such completion, as increased by any monetary consideration received by the land owner, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the land; The benefit of the above provisions shall not apply to an assessee who transfers his share in the project to any other person on or before the date of issue of said certificate of completion. Chartered AccountantsPage 1 of 6
Further, in case any monetary consideration is payable under the JDA, tax at the rate of ten per cent shall be deductible from such payment. Sub-section 5A inserted in Sec 23 to specifically provide that no notional income for vacant house property which is held as stock-in-trade, for the period up to one year from the end of the financial year in which the completion certificate for such property is obtained. o This implies that if the property remains vacant after the expiry of the aforesaid period of 1 year from completion, the same shall be subject to notional income under the head 'income from house property' even if such property is held as stockin-trade. Certain tax incentives proposed for the development of capital of Andhra Pradesh 3. Anti-abuse measures: Fee for delayed filing of return - Rs 5,000 if delayed return furnished before 31st December; in other cases Rs. 10,000. However, in a case where total income does not exceed Rs. 5 lakhs, the fee amount shall not exceed Rs. 1,000. Penalty of Rs 10,000 on professionals for furnishing incorrect information in statutory report or certificate Exemption of long term capital gain on transfer of equity shares u/s 10(38) - With a view to prevent the abuse of exemption u/s 10(38) by certain persons by entering into sham transactions, it is proposed to amend section 10(38) to provide that such exemption will not be available if the equity share was acquired on or after 01/10/2004 and such transaction is not chargeable to Securities Transactions Tax ('STT'). However, to protect the exemption for genuine cases where the STT could not have been paid like acquisition of share in IPO, FPO, bonus or right issue, etc., it is also proposed to notify such transfers for which the condition of chargeability to STT shall not be applicable. Transfer of unlisted shares of a company - Fair market value ('FMV') to be deemed as consideration for transfer of a capital asset, being unquoted share of a company, if the amount of actual sale consideration is less than such FMV. The FMV is to be computed in a manner to be prescribed. Enhancement in scope of Sec 56 in respect of taxability of any sum of money / property received without consideration or for inadequate consideration - Currently, these antiabuse provisions are applicable only in case of individual or HUF, and in certain cases of firm or company. Such anti-abuse provisions are now proposed to be made applicable to all categories of assessee by inserting a new clause (x) in Sec 56(2). Chartered AccountantsPage 2 of 6
4. Measures to discourage cash transactions: No deduction shall be allowed under the section 80G in respect of donation of any sum above Rs 2,000 if such sum is paid in cash Limit of cash payment u/s 40A(3) in respect of disallowance of revenue expenditure reduced to Rs 10,000 from the existing limit of Rs 20,000 Similar limit introduced even for Capital expenditure - Disallowance of depreciation under section 32 and Capital expenditure under section 35AD on cash payment, if such cash payment made to a person in a day exceeds Rs 10,000. Presumptive income u/s 44AD in case of small businesses having total annual turnover below Rs 2 Cr - Profit shall be deemed at 6% (instead of 8% in other cases) in respect of the amount of total turnover received through the banking channel during the year or before the due date of filing return. Cash transactions above Rs 3 lakhs prohibited - Sec 269ST inserted to provide that no person shall receive an amount of Rs 3 lakhs or more otherwise than through the banking channel, in aggregate from a person in a day or in respect of a single transaction/ event/ occasion. In case a person who receives a sum in contravention of the above provisions, he shall be liable to Penalty of a sum equal to the amount of such receipt unless he proves that there were good and sufficient reasons for the contravention. Tax exemption to Political parties will not be allowed if - any donation of Rs 2,000 or more is received in cash or if the party fails to furnish return of income within the due date 5. Measures for stimulating growth: Extension of eligible period for availing concessional tax rate of 5% on interest income in case of External Commercial Borrowing/ Specified bonds - borrowings can now be done upto 1st July 2020 instead of the existing time limit of 1st July 2017. Certain relaxations for eligible Start-up companies as referred to in Sec 80-IAC - Extended period for selecting the years for which deduction is to be claimed & Different criteria u/s 79 for disallowance of carry forward of loss on account of change in shareholding Credit for MAT / AMT can now be carried forward upto 15 years instead of existing period of 10 years 6. Measures to facilitate ease of doing business: Scope of Domestic Transfer Pricing provisions reduced significantly - Expenditure in respect of which payment has been made by the assessee to a related party referred to u/s 40A(2)(b) will now not fall within the purview of Domestic TP provisions. Thus, the scope of Domestic TP provisions will be restricted only to those cases where one of the party to the transaction is claiming a tax holiday. Increasing the threshold limit for maintenance of books of accounts in case of individuals and HUF - monetary limits of income and total sales turnover increased from Rs 1.2 lakhs to Rs 2.5 lakhs and from Rs 10 lakhs to Rs 25 lakhs respectively. Chartered AccountantsPage 3 of 6
Tax audit limit for business u/s 44AB increased to Rs 2 Crores, provided that the profit declared by the assessee is not below presumptive income u/s 44AD (Applicable from AY 2017-18 onwards) Simplification of the provisions of TDS u/s 194J - rate of TDS reduced to 2% from 10% in case of payments made to a person who is engaged only in the business of operation of call center. Conversion of preference shares to equity shares will be tax neutral similar to the treatment for conversion of bond or debenture to a share or debenture. Clarity provided on the issue of taxation of income from transfer of carbon credits - Section 115BBG inserted to provide that income from transfer of carbon credit shall be taxable at the concessional rate of 10% (plus applicable surcharge and cess) on the gross amount of such income. Returns to be processed u/s 143(1) and consequent refund to be issued even if the case has been selected for scrutiny assessment. Refund can be withheld by the AO upto the completion of assessment only in certain cases where the AO is of the opinion that grant of refund may adversely affect the recovery of revenue and the AO obtains previous approval of the Commissioner. Professionals who declare profits in accordance with the presumptive taxation regime u/s 44ADA shall be liable to pay advance tax in only one instalment on or before the 15th of March. No interest payable u/s 234C on the amount of shortfall in payment of advance tax if such shortfall is on account of under-estimation of dividend income taxable u/s 115BBDA. Amendments to the structure of Authority for Advance Rulings - With a view to promote ease of doing business, it has been decided by the Government to merge the Authority for Advance Ruling for income-tax, central excise, customs duty and service tax. In order to reduce the genuine hardship which may be faced by a person responsible for deduction and collection of tax at source due to levy of Penalty u/s 271C or 271CA, the CBDT has been empowered to issue directions or instructions u/s 119 in respect of the above sections also. Reduction in time available for furnishing Revised return of income u/s 139(5) - Revised return can now be filed only upto the end of the relevant assessment year instead of a further period of 1 year allowed under the existing provisions. Reduction of time limit available to the Revenue authorities for completion of assessment and reassessment proceedings. 7. Rationalisation measures and enhancement in power of Revenue authorities: Higher rate of TCS in case of non furnishing of PAN - Statuary provisions for deduction of TDS at higher rate of 20% in case of non-quoting of PAN is provided under section 206AA of the Act. Provisions on similar lines are proposed to be introduced in the TCS regime by inserting section 206CC in order to strengthen the PAN quoting mechanism. Restriction on set-off of loss from House property against income under any other head - it is proposed to insert sub-section (3A) in section 71 to provide that set-off of loss under the head "Income from house property" against any other head of income shall be restricted to Rs. 2 lakhs 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. Chartered AccountantsPage 4 of 6
Rationalisation of provisions of Section 10AA - Courts have taken a view (while deciding the matter pertaining to section 10A which also contains similar provision as section 10AA) that the deduction is to be allowed from the total income of the undertaking and not from the total income of the assessee. It is proposed to clarify that the amount of deduction referred to in section 10AA shall be allowed from the total income of the assessee (and not total income of the SEZ unit) computed in accordance with the provisions of the Act before giving effect to the provisions of section 10AA and the deduction under section 10AA in no case shall exceed the said total income. Search and Seizure - Reason to believe to conduct a search, etc. not to be disclosed to any person or any authority or the Appellate Tribunal. - Power of provisional attachment and to make reference to Valuation Officer, to authorised officer Extension of the power to conduct a Survey u/s 133A - It is proposed to widen the scope to also include any place, at which an activity for charitable purpose is carried on. Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential amendment to section 153A and 153C - Section 197(c) of the Finance Act, 2016 empowered the Revenue authorities to issue notice for assessing/ reassessing income of any earlier year without any time limitation. In view of the various representations received from stakeholders citing genuine hardships if the said provision is made applicable, it is proposed to omit such clause (c) of section 197 of the Finance Act, 2016. However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including 132A cases) and the same is represented in the form of undisclosed investment in any asset, it is proposed that section 153A relating to search assessments be amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided upto the tenth assessment year, in certain cases. Rationalisation of provisions of section 115JB in line with Indian Accounting Standard (Ind-AS) which are converged with International Financial Reporting Standards(IFRS) - As the book profit based on Ind AS compliant financial statements is likely to be different from the book profit based on existing Indian GAAP, it is proposed to amend section 115JB so as to provide the framework for computation of book profit for Ind AS compliant companies in the year of adoption and thereafter. Rationalisation of rebate allowable under Section 87A - the maximum amount of rebate available u/s 87A reduced from existing Rs. 5,000 to Rs. 2500. Also, this rebate shall be available to only resident individuals whose total income does not exceed Rs. 3,50,000. Trusts - It is proposed to amend section 12A so as to provide that where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain Chartered AccountantsPage 5 of 6
fresh registration by making an application within a period of 30 days from the date of such adoption or modifications of the objects in the prescribed form and manner. It is proposed to further amend section 12A so as to provide for further condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. New Sec 194-IB introduced to provide for deduction of tax at source @ 5% on rent payment by individual/huf (other than those covered u/s 44AB) if the amount of monthly rent exceeds Rs 50,000. Enhancement in the power of the authorities to call for information The power in respect of inquiry or proceeding under the Act may also be exercised by the Joint Director, the Deputy Director and the Assistant Director, without seeking prior approval of higher authorities. Legislative framework to enable centralised issuance of notice and processing of information under section 133C - CBDT empowered to make a scheme for centralised issuance of notice calling for information and documents for the purpose of verification of information in its possession, processing of such documents and making the outcome thereof available to the Assessing Officer for necessary action, if any. Increase in upper limit of deduction u/s 80CCD for self-employed individual for amount deposited in NPS, from 10% of gross total income to 20%. Chartered AccountantsPage 6 of 6