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UNION BUDGET 2018 HIGHLIGHTS
(DIRECT TAX PROPOSALS)
Disclaimer
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Few Signification Budget Proposals other than Direct Taxes
- Amendment in Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) to provide that earlier rate of 8.33% of Government contribution in EPF for all sectors (except textile sector wherein rate was 12%) be replaced by 12% for new employees for 3 years.
- Amendment in Employees Provident Fund and Miscellaneous Provisions Act, 1952 to to reduce women employees’ contribution to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers’ contribution.
- Special provision for exemption from service tax in certain cases relating to life insurance services provided by Naval Group Insurance Fund to personnel of Coast Guard, retrospectively.
- Special provision for exemption from service tax in certain cases relating to services provided or agreed to be provided by Goods and Services Tax Network, retrospectively
- Special provision for retrospective exemption from service tax on Government’s share of profit petroleum.
- Increase in customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%.
- Reduction in customs duty on raw cashew from 5% to 2.5%.
- The Education Cess and Secondary and Higher Education Cess on imported goods abolished, and in its place impose a Social Welfare Surcharge, at the rate of 10% of the aggregate duties of Customs, on imported goods, to provide for social welfare schemes of the Government. Goods which were hitherto exempt from Education Cesses on imported goods will, however, be exempt from this Surcharge. In addition, certain specified goods, will attract the proposed Surcharge at the rate of 3% of the aggregate duties of customs only.
Revised Rates under Income Tax for F Y 2018-19 onwards
- Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person.
(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or Hindu undivided family or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person
| Upto ₹ 2,50,000 | Nil. |
| ₹ 2,50,001 to ₹ 5,00,000 | 5 per cent. |
| ₹ 5,00,001 to ₹ 10,00,000 | 20 per cent. |
| Above ₹ 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 eighty years at any time during the previous year,-
| Upto ₹ 3,00,000 | Nil. |
| ₹ 3,00,001 to ₹ 5,00,000 | 5 per cent. |
| ₹ 5,00,001 to ₹ 10,00,000 | 20 per cent. |
| Above ₹ 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,-
| Upto ₹ 5,00,000 | Nil. |
| ₹ 5,00,001 to ₹ 10,00,000 | 20 per cent. |
| Above ₹ 10,00,000 | 30 per cent. |
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be increased by a surcharge at the rate of,-
(i) ten per cent. of such income-tax in case of a person having a total income exceeding fifty lakh rupees but not exceeding one crore rupees; and
(ii) fifteen per cent. of such income-tax in case of a person having a total income exceeding one crore rupees.
Rebate u/s 87A: Rebate u/s 87A 2500 and rebate of 2500 will be available only if the total income of the Individual is below Rs.3,50,000
- Co-operative Societies
| Net Income Range | Rate of Tax |
| Up to Rs. 10,000 | 10% |
| Rs. 10,000 – Rs. 20,000 | 20% |
| Rs. 20,000 and above | 30% |
Note 1: – Add Surcharge – 12% if income exceeds Rs. 1 Crores – with marginal relief.
Note 2: – Add Health and Education Cess – 4 % of Income Tax
- Companies
| Company | Rate of Income Tax | |
| In case of domestic company (turnover not exceeding Rs. 250 crore in P. Y. 2016-17) | 25% | |
| Companies other than above | 30% | |
| In case of foreign Company | ||
| – | Royalty received from Government or an Indian Concern in pursuance of an agreement made by it with the Indian concern after March 31, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made by it after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by central Government | 50% |
| – | Other Income | 40% |
Notes:
Note 1: – Add Surcharge – Surcharge is 7% of income-tax, in case of domestic companies and 2% in case of foreign companies if net income exceeds Rs.1 crore but not exceeding Rs. 10 Crore in either case. Rate of Surcharge will be 12% of income-tax in case of domestic companies and 5% in case of foreign companies if net income exceeds Rs.10 Crore in either case. Surcharge is subject to marginal Relief.
Note 2: – Add Health and Education Cess – 4 % of Income Tax.
- Firms and Local Authority
Rate of Tax is 30%.
Notes:
Note 1: – Add Surcharge – 12% if income exceeds Rs. 1 Crores – with marginal relief.
Note 2: – Add Health and Education Cess – 4 % of Income Tax
AMENDMENT IN MAIN PROVISION
| Sections Involved | Existing Provision | Proposed Amendment | Impact | |
| Enhancement in Deductions from Taxable Income | ||||
| Section 80D- Deductions available to senior citizens in respect of health insurance premium and medical premium (w.e.f 1st April, 2019) |
Section 80D, inter-alia, provides that a deduction up to Rs 30,000/- shall be allowed to an assessee, being an individual or a Hindu undivided family, in respect of payments towards annual premium on health insurance policy, or preventive health check-up, of a senior citizen, or medical expenditure in respect of very senior citizen. | It is proposed to raise the monetary limit of deduction from Rs. 30,000 to Rs. 50,000 and same provisions have been made applicable for senior citizen and very senior citizen. In case of single premium health insurance policies having cover of more than one year, it is proposed that the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit. |
Increased deduction of Rs.50000/- in case of senior citizens. | |
| Section 80DDB – Payment for medical treatment of specified diseases. (w.e.f. 1st April, 2019) | Section 80DDB of the Act, inter-alia, provide that a deduction is available to an individual and Hindu undivided family with regard to amount paid for medical treatment of specified diseases in respect of very senior citizen up to Rs 80,000/- and in case of senior citizens upto Rs 60,000/- subject to specified conditions. | It is proposed to amend the provisions of section 80DDB of the Act so as to raise this monetary limit of deduction to Rs 1,00,000/- for both senior citizens and very senior citizens. |
Increased deduction of Rs.100000 making the same at par for senior and very senior citizen. | |
| Section 80TTA and 194A- Deduction in respect of payment of interest income to senior citizen.(w.e.f. 1st April 2019) | Section 80TTA provides for the Deduction of Rs.10,000 in respect of interest income from savings bank account. | It is proposed to insert a new section 80TTB so as to allow a deduction up to Rs 50,000/- in respect of interest income from deposits held by senior citizens. However, this section shall not apply to non-senior citizens. Further, the threshold limit for TDS (deduction of tax) at source on interest income for senior citizens has also proposed to be increased from Rs. 10,000 to Rs. 50,000. |
Additional deduction from gross total income for senior citizens only upto interest income of Rs.50,000/- and corresponding amendment in TDS. | |
| Section 16 –Certain deductions in computing the income under the head “Salary” (w.e.f. 01st April 2019) | Provides for certain deductions in computing the income under the head Salaries. | It is proposed to allow a standard deduction up to Rs 40,000/- or the amount of salary received, whichever is less. The deduction in respect of transport allowance (except in case of differently abled persons) and reimbursement of medical expenses proposed to be withdrawn. | Additional effective deduction of Rs.5,800/- i.e. Rs.40,000/- proposed deduction – (minus) existing deduction of Rs.19200 in case of Transport allowance and Rs.15000/- for medical reimbursements. | |
| Changes in Presumption Taxation | ||||
| Section 44AE – Presumptive Income in case of goods carriage.(w.e.f. 01st April 2019) |
Section 44AE, provides that, the profits and gains shall be deemed to be an amount equal to seven thousand five hundred rupees per month or part of a month for each goods carriage or the amount claimed to be actually earned by the assessee, whichever is higher. The only condition which needs to be fulfilled is that the assessee should not have owned more than 10 goods carriages at any time during the previous year. | It is proposed to amend the section 44AE of the Act to provide that, in the case of heavy goods vehicle (more than 12MT gross vehicle weight) the income would be INR 1000 per ton of gross vehicle weight or unladen weight (the weight of a vehicle when not loaded with goods) as the case may be, per month or part of a month for each goods vehicle or the amount claimed to be actually earned by the assessee, whichever is higher. However for other vehicles, the existing provisions will prevail. | Change in income from 7500 per month to Rs.1000/- per Ton of Vehicle Weight per month or part of the month in respect of heavy vehicle. | |
| Changes in Deemed Divided Provisions | ||||
| 2(22) Meaning of Dividend (w.e.f. 01st April, 2019 i.e. A Y 2019-20) |
Accumulated profits’ for the purposes of the said clause, as all profits of the company up to the date of distribution or payment or liquidation, subject to certain conditions | It is proposed to insert a new Explanation 2A in clause (22) of section 2 of the Act to widen the scope of the term ‘accumulated profits’ so as to provide that in the case of an amalgamated company, accumulated profits, whether capitalised or not, or losses as the case may be, shall be increased by the accumulated profits of the amalgamating company, whether capitalized or not, on the date of amalgamation. |
Presently the companies are resorting to abusive arrangements in order to escape liability of paying tax on distributed profits. Under such arrangements, companies with large accumulated profits adopt the amalgamation route to reduce capital and circumvent the provisions of sub-clause (d) of clause (22) of section 2 of the Act. Therefore in order to curb such schemes, this amendment is proposed. | |
| 115O- Dividend Tax on distributable profits. | No DDT on deemed dividend defined u/s 2(22)(e) of the Act. | Deemed dividend u/s 2(22)(e) is proposed to be taxed at the rate of 30 per cent. (without grossing up) in order to prevent camouflaging dividend in various ways such as loans and advances. | Now the company paying loans and advances which are deemed dividend u/s 2(22)(e) of the Act are required to deposit DDT @ 30% (without grossing up). However, No consequential amendment has been made in TDS provision for deduction of Tax in case of deemed dividend. |
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| Section 271 FA Penalty for failure to furnish statement of financial transaction or reportable account. (w.e.f. 1st April, 2018.) |
The Existing provisions of the Section provided that if a person who is required to furnish the statement of financial transaction or reportable account under sub-section (1) of section 285BA, fails to furnish such statement within the prescribed time, he shall be liable to pay penalty of one hundred rupees for every day of default. The proviso to the said section further provides that in case such person fails to furnish the statement of financial transaction or reportable account within the period specified in the notice issued under sub-section (5) of section 285BA, he shall be liable to pay penalty of five hundred rupees for every day of default. |
It is proposed to amend the section 271FA so as to increase the penalty leviable from one hundred rupees to five hundred rupees and from five hundred rupees to one thousand rupees, for each day of continuing default. |
Penalty for non filing of AIR information has been increased. | |
| Section 271J Appeal against penalty imposed by Commissioner. (w.e.f 01st April 2018) |
Section 253 provided that any assessee aggrieved by the orders mentioned under sub section 1 of the said section may appeal to the appellate tribunal against such order. | It is proposed to amend clause (a) of the said sub-section so as to also make an order passed by a Commissioner (Appeals) under section 271J appealable before the Appellate Tribunal. |
Appeal can be filed against order passed u/s 271J by CIT(A) in respect of incorrect information or certificate by Accountant or merchant banker or registered valuer. | |
| Royalty and FTS payment by NTRO to a non-resident to be tax-exempt. (w.e.f. 01st April 2018) |
Section 195 requires a person to deduct tax at the time of payment or credit to a non-resident. |
It is proposed to amend section 10 so as to provide that the income arising to non-resident, not being a company, or a foreign company, by way of royalty from, or fees for technical services rendered in or outside India to, the NTRO will be exempt from income tax. Consequently, NTRO will not be required to deduct tax at source on such payments. |
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| 80JJAA Incentive for employment generation. (w.e.f. 01st April 2019) |
Under section 80-JJAA of the Act, a deduction of 30% is allowed in addition to normal deduction of 100% in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year. | However, the minimum period of employment is relaxed to 150 days in the case of apparel industry. In order to encourage creation of new employment, it is proposed to extend this relaxation to footwear and leather industry. It is also proposed to rationalize this deduction of 30% by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year. |
Relief for Footwear industry and also in case new eligible employee employed for less than the required period but continued to employ for minimum period in succeeding year, he shall qualify to be new employee in the succeeding year. | |
| Measures to promote start-ups. (w.e.f. 01st April 2018) | Section 80-IAC of the Act, inter alia, provides that deduction under this section shall be available to an eligible start-up for three consecutive assessment years out of seven years at the option of the assessee, if- (i) it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2019; (ii) the total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 31st day of March, 2021; and (iii) it is engaged in the eligible business which involves innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property. |
It is proposed to make the following changes in the taxation regimes for the start ups:- (i) The benefit would also be available to start ups incorporated on or after the 1st day of April 2019 but before the 1st day of April, 2021; (ii) The requirement of the turnover not exceeding Rs 25 Crore would apply to seven previous years commencing from the date of incorporation; (iii) The definition of eligible business has been expanded to provide that the benefit would be available if it is engaged in innovation, development or improvement of products or processes or services, or a scalable business model with a high potential of employment generation or wealth creation |
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| Section 80 P (w.e.f. 01st April 2019) | Section 80P provides for 100 percent deduction in respect of profit of cooperative society which provide assistance to its members engaged in primary agricultural activities. |
It is proposed to extend similar benefit to Farm Producer Companies (FPC), having a total turnover upto Rs 100 Crore, whose gross total income includes any income from- (i) the marketing of agricultural produce grown by its members, or (i) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (iii) the processing of the agricultural produce of its members The benefit shall be available for a period of five years from the financial year 2018-19 |
Relief similar to available in case of Cooperative societies engaged in primary agriculture activities. | |
| Changes with respect to Exemption in case of Long Term Listed Securities. | ||||
| 10(38), 112A (New Insertion) w.e.f A Y 2019-20. | No Tax on gain earned on sale of Equity Shares or unit of equity oriented funds or unit of business trust held for or more than one year i.e. exempt u/s 10(38) of the Act provided all conditions are satisfied. | It is proposed to tax long term capital gains or units of equity oriented funds or unit of business trust @ 10% on long term capital gain exceeding INR 100,000/- without any indexation, cost of improvement or forex benefit in case of Non-resident assessee. However, the cost of securities (Acquired before 01.02.2018) shall be calculated higher of the following:- a. Cost of acquisition of such asset: and b. the lower of – i. the fair market value of such asset; and ii. the full value of consideration received or accruing as a result of the transfer of the capital asset. The meaning of fair value shall be, in case of listed equity shares, highest quote on 31st January, 2018 if traded on that date or immediately preceding trade date and in case of unlisted security the net asset value of such asset as on the 31st day of January, 2018. Further, the meaning of equity oriented funds has been also amended. No Deduction shall be allowed u/c VIA and rebate u/s 87A from such capital gain. Further, requirement of payment of STT at the time of transfer shall not apply in case of sale on Recog. Stock Exchange in International Financial Services Centre( IFSC) and the consideration of such transfer is received or receivable in foreign currency. Central Government is also empowered to notify certain acquisition of securities on which condition of payment of STT is not applicable. (like preferential allotment etc.) |
Now the transaction in listed equity shares involvind long term gain will be subject to tax @10% on difference of sale consideration and Higher of (cost of acquisition and [lower of fair market value as on 31.01.2018 or consideration receivable]. For example, if an equity share is purchased six months before 31st January, 2018 at 100/- and the highest price quoted on 31st January, 2018 in respect of this share is 120/-, there will be no tax on the gain of 20/- if this share is sold after one year from the date of purchase. However, any gain in excess of 20 earned after 31st January, 2018 will be taxed at 10% if this share is sold after 31st July, 2018. However, the amendment will take effect from 01.04.2018 and will not be applicable on any transaction of sale on or before 31.03.2018. |
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| Section 115AD- Tax on income of Foreign Institutional Investors from securities (w.e.f. 01st April 2019) |
Under the existing provisions, long term capital gains arising from transfer of long term capital asset being equity shares of a company or a unit of equity oriented fund or a unit of business trusts, is exempt from income-tax under clause (38) of section 10 of the Act. |
It is proposed to withdraw the exemption under section 10(38) and as a consequence, such long term capital gain shall be taxable in the hands of the Foreign Institutional Investor. The tax shall be levied only on an amount of gain exceeding Rs. 1,00,000. | Consequential amendment in section 115AD as made in 112A of the Act. | |
| Section 115R – Dividend Distribution Tax on dividends paid to the Unit Holders of an equity oriented fund.( w.e.f. 01st April 2018). |
Section 115R provides for the payment of additional income tax by the specified company or a Mutual Fund at the rate specified under this section. Earlier no such requirement was in case of equity oriented fund. | The said section is amended to provide that where any income is distributed by a Mutual Fund, being an equity oriented fund, the Mutual Fund shall be liable to pay an additional income tax @ 10% on the income so distributed. | ||
| Extending the Scope of Business Connection | ||||
| 9 (Dependent Agent) w.e.f A Y 2019-20. | Under the existing provisions of Explanation 2 to clause (i) of sub-section (1) of section 9, “business connection” includes business activities carried on by non-resident through dependent agents. The scope of “business connection” under the Act is similar to the provisions relating to Dependent Agent Permanent Establishment (DAPE) in India’s Double Taxation Avoidance Agreements (DTAAs). In terms of the DAPE rules in tax treaties, if any person acting on behalf of the non-resident, is habitually authorised to conclude contracts for the non-resident, then such agent would constitute a PE in the source country. However, in many cases, with a view to avoid establishing a permanent establishment (hereafter referred to as ‘PE’) under Article 5(5) of the DTAA, the person acting on the behalf of the non-resident, negotiates the contract but does not conclude the contract. Further, under paragraph 4 of Article 5 of the DTAAs, a PE is deemed not to exist when a place of business is engaged solely in certain activities such as maintenance of stocks of goods for storage, display, delivery or processing, purchasing of goods or merchandise, collection of information. This exclusion applies only when these activities are preparatory or auxiliary in relation to the business as a whole. |
Suitable amendments have been made to wider the scope of business connection as referred to in provisions of Explanation 2 to clause (i) of sub-section (1) of section 9 to align the same with Article 5(4) and Article 5(5) of Double Tax Avoidance Agreement as amended/after adoption of Article 12 of Multilateral Convention to Implement Tax Treaty Related Measures. In pursuance of the same it is proposed that business connection shall also include any business activities carried through a person who, acting on behalf of the non-resident, habitually concludes contracts or habitually plays the principal role leading to conclusion of contracts by the non-resident. | Now the agent would include not only a person who habitually concludes contracts on behalf of the non-resident, but also a person who habitually plays a principal role leading to the conclusion of contracts, thus aligning the provision of DTAA with Domestic law. | |
| 9 w.e.f A Y 2019-20. | No Provisions in DTAA or Income Tax Act to tax transaction without physical presence of Non-Residents through PE except certain transactions. Therefore, transactions through digital mode without physical presence are out of tax purview. | Now it is proposed to tax transactions on the basis of concept called significant economic presence on the basis of recommendation of OECD under its BEPS Action Plan 1, according to which a non-resident enterprise would create a taxable presence in a country if it has a significance economic presence in that country on the basis of factors that have a purposeful and sustained interaction. In view of the above, it is proposed to amend clause (i) of sub-section (1) of section 9 of the Act to provide that ‘significant economic presence’ in India shall also constitute ‘business connection’. Further, “significant economic presence” for this purpose, shall mean- (i) any transaction in respect of any goods, services or property carried out by a non-resident in India including provision of download of data or software in India if the aggregate of payments arising from such transaction or transactions during the previous year exceeds the amount as may be prescribed; or (ii) systematic and continuous soliciting of its business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means. It is further proposed to provide that only so much of income as is attributable to such transactions or activities shall be deemed to accrue or arise in India. It is further proposed to provide that the transactions or activities shall constitute significant economic presence in India, whether or not the non-resident has a residence or place of business in India or renders services in India. Further, threshold of “revenue” and the “users” in India will be decided after consultation with the stakeholders. Further, it is also clarified that unless corresponding modifications to PE rules are made in the DTAAs, the cross border business profits will continue to be taxed as per the existing treaty rules. |
Now the entities who having no presence in india but having customer base in india through digital/electronic media will also be liable to income tax subject to certain criteria. | |
| Measures to Promote International Financial Services Centre (IFSC) | ||||
| 47 (neutrality relating to certain transfer) w.e.f A Y 2019-20. | No such relaxation currently | In order to promote the development of world class financial infrastructure in India, it is proposed to amend the section 47 of the Act so as to provide that transactions in the following assets, by a non-resident on a recognized stock exchange located in any International Financial Services Centre shall not be regarded as transfer, if the consideration is paid or payable in foreign currency:— (i) bond or Global Depository Receipt, as referred to in sub-section (1) of section 115AC; or (ii) rupee denominated bond of an Indian company; or (iii) derivative. |
Such transaction will not be regarded as transfer under capital gains. | |
| 115JC, 115JF w.e.f A Y 2019-20. |
Currently tax @ 18.50 % | Proposed Tax @ 9% | Relaxation and almost the tax rated is reduced to half of earlier levy. |
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| Relief in Minimum Alternate Tax (MAT) | ||||
| 115JB w.e.f A Y 2018-19 | Lower of brought forward loss or unabsorbed depreciation as per books of accounts is eligible to be set off against Book Profit. | It is proposed to amend section 115JB to provide that the aggregate amount of unabsorbed depreciation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit, if a company’s application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the Adjudicating Authority. | Big relief for such companies as they would be able to reduce the entire amount of losses appearing in balance sheet against the book profits. | |
| 115JB w.r.e.f. A Y 2001-02. | Clarificatory amendment | It is proposed in section 115JB of the Act to provide that the provisions of section 115JB of the Act shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, if- its total income comprises solely of profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the rates specified in the said sections. | Only clarificatory amendment. | |
| Facilitating Insolvency Resolution | ||||
| 79 w.e.f A Y 2018-19 | Carry forward and set off of losses in a closely held company shall be allowed only if there is a continuity in the beneficial owner of the shares carrying not less than 51 percent. of the voting power, on the last day of the year or years in which the loss was incurred. | It is proposed to relax the such condition in section 79 in case of companies, whose resolution plan has been approved under the Insolvency and Bankruptcy Code, 2016, after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner. | Big relief for such companies as no impact of change in shareholding to their brought forward losses due to rider of section 79. | |
| 140 w.e.f A Y 2018-19. | No provision of signing by any other person in case of Insolvency and Bankruptcy. | It is proposed that during the resolution process under the Insolvency and Bankruptcy Code, 2016, the return shall be verified by an insolvency professional appointed by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 | Clarificatory in nature. | |
| New scheme for scrutiny assessment | ||||
| 143 w.e.f. 01st April 2018 | Normal face to face or e-assessment option. | It is proposed to prescribe a new scheme for the purpose of making assessments so as to impart greater transparency and accountability, by eliminating the interface between the Assessing Officer and the assessee, optimal utilization of the resources, and introduction of team-based assessment. | The income tax department has moved towards name less and face less scrutiny assessment on PAN India basis. The scheme would be released and notified accordingly. | |
| Rationalization Measures | ||||
| Section 116(7), 117 and 118 of Finance Act, 2013. w.e.f A Y 2018-19. | Definition of taxable commodities transaction to mean a transaction of sale of commodity derivatives in respect of commodities, other than agricultural commodities, traded in recognised association. The rate at which a commodities transaction tax in respect of every commodities transaction, being sale of commodity derivative shall be chargeable and such tax shall be payable by the seller. |
In order to align the definition of “taxable commodities transaction” with instruments allowed for transaction in commodity derivatives, it is proposed to amend the clause (7) of section 116 so as to include “options in commodity futures” in the definition of “taxable commodities transactions. In order to propose rates for option on commodity derivative, it is proposed to amend the provisions of section 117 so as to prescribe the rate at which sale of an option on commodity derivative shall be chargeable and such tax shall be payable by the seller and where option is exercised, such tax shall be chargeable and such tax shall be payable by the purchaser. |
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| 276CC (Prosecution for non filing of return) w.e.f. 01st April 2018 | A person willfully fails to furnish in due time the return of income which he is required to furnish, he shall be punishable with imprisonment for a term, as specified therein, with fine, if tax payable by him on the total income determined on regular assessment as reduced by the advance tax, if any, paid and any tax deducted at source, does not exceed INR 3000. | In order to prevent abuse of the said proviso by shell companies or by companies holding Benami properties, it is proposed to amend the provisions and they are liable for imprisonment even if no such tax payable. | Now in case of companies the return filing is mandatory even if there is no tax payable. | |
| 143(1) Prima-facie adjustment in return of income w.e.f A Y 2018-19. | Sub-clause (vi) of the said clause provides for adjustment in respect of addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return. |
With a view to restrict the scope of adjustments, it is proposed to insert a new proviso to the said clause to provide that no adjustment under sub-clause (vi) of the said clause shall be made in respect of any return furnished on or after the assessment year commencing on the first day of April, 2018. |
The difference in income shown in return of income and amount credited in form 26AS/Form 16/16A was earlier subjected to adjustment in intimation generated u/s 143(1)(a) of the Act, although CBDT has issued a circular relaxing such adjustments subject to opportunity given to assessee. However, in case of any return filed after 01st April 2018 no such adjustment would be made u/s 143(1)(a) of the Act. | |
| 286 (Country by Country Report in case of applicability of Transfer Pricing Provisions) w.e.f A Y 2017-18. | – | Rationalization of time limits for filing Country by Country Report), in the case of parent entity or Alternative Reporting Entity (ARE), resident in India | Relaxation in time limit of filing of CbCR, mandatory filing of CbCR even no such requirement of filing this report in country of resident of parent company etc.. | |
| 115BA w.e.f A Y 2017-18. | 25% tax subject to no deduction of various deductions like investment linked and accelerated depreciation for companies registered on or after 01st March, 2016 and engaged in manufacturing, production, research or distribution. | There are certain incomes which are subject to a scheduler tax, at a rate which is lower or higher than 25 per cent. Consequently tax payers have been subjected to unintended hardship or unwarranted relief. Accordingly it is proposed to amend section 115BA so as to clarify that the provisions of section 115BA is restricted to the income from the business of manufacturing, production, research or distribution referred to therein; and income which are at present taxed at a scheduler rate will continue to be so taxed. | Various income which are either subject to low rate of tax or high rate of tax would be taxable at the prescribed rates only. The income from business would only be subject to lower rate of tax of 25% subject to fulfillment of other conditions. | |
| 10(12A) exemption of withdrawal of NPS. w.e.f A Y 2019-20. | Under the existing provisions of the clause (12A) of section 10 of the Act, an employee contributing to the NPS is allowed an exemption in respect of 40% of the total amount payable to him on closure of his account or on his opting out | In order to provide a level playing field, it is proposed to amend clause (12A) of section 10 of the Act to extend the said benefit to all subscribers. | Extension of exemption u/s 10(12A) to non employee assessee’s. | |
| 80AC w.e.f A Y 2018-19. | No deduction u/s 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, unless the return of income by the assessee is furnished on or before the due date specified under sub-section (1) of section 139 of the Act | It is substituted and scope of 80AC is extended to all deductions under the heading “C.—Deductions in respect of certain incomes” in Chapter VIA. Thus, no deduction will be allowable unless the return is filed timely on or before the due date specified under sub-section (1) of section 139 of the Act. | Under section 80AC all deductions are covered so that timely compliance for filing of return be made by taxpayer. | |
| 43CA, section 50C and section 56 (Applicability of Stamp duty valuation) w.e.f A Y 2019-20. | The sale consideration or stamp duty value, whichever is higher is adopted for calculating profit. The difference is taxed as income both in the hands of the purchaser and the seller. | In order to minimize hardship in case of genuine transactions in the real estate sector, it is proposed to provide that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration. | Where the difference between stamp duly value and consideration is 5% of consideration, then the consideration shall be deemed to be fair value. | |
| Section 28, 56 – Charging Section for Business Income and Other sources. (w.e.f. 01st April 2019) | Under the existing provisions, certain types of compensation receipts are taxable under section 28. However, a large segment of compensation receipts in connection with the business and employment is out of the purview of taxation leading to base erosion and revenue loss. | It is proposed to amend section 28 of the Act to provide that any compensation received or receivable, whether revenue or capital, in connection with the termination or the modification of the terms and conditions of any contract relating to its business shall be taxable as business income. It is further proposed that any compensation received or receivable, whether in the nature of revenue or capital, in connection with the termination or the modification of the terms and conditions of any contract relating to its employment shall be taxable under section 56 of the Act. |
Specific Receipts under dispute whether revenue or capital in nature is brought to tax with a view provide clarity. | |
| 2(24), 2(42A), 28, 45, 49 w.e.f A Y 2019-20. | No such provision currently governing conversion of stock in trade to Capital Asset. | Section 28: Any profit or gains arising from conversion of inventory into capital asset or its treatment as capital asset shall be charged to tax as business income. It is also proposed to provide that the fair market value of the inventory on the date of conversion or treatment determined in the prescribed manner, shall be deemed to be the full value of the consideration received or accruing as a result of such conversion or treatment. Section 2(24): Include such fair market value in the definition of income. Section 2(42A): Period of holding of such capital asset shall be reckoned from the date of conversion or treatment. Section 49: For the purposes of computation of capital gains arising on transfer of such capital assets, the fair market value on the date of conversion shall be the cost of acquisition. |
Now, the conversion of stock in trade into capital asset will be deemed as business profits in the year of conversion and for capital purpose cost would be deemed to be fair market value at the time of conversion and period of holding would be counted from the date of conversion. | |
| 56 (Transfers without consideration) w.e.f A Y 2019-20 | The transfers referred to in clause (iv) and clause (v) of section 47 have not been excluded from the scope of section 56 | In order to further facilitate the transaction of money or property between a wholly owned subsidiary company and its holding company, it is proposed to amend the section 56 so as to exclude such transfer from its scope. | Transaction without consideration among subsidiary and holding companies is kept out of newly amended section 56(x) and thus such transaction shall not be considered as income in the hand of recipients. | |
| 54EC (Investment in Bonds) w.e.f A Y 2019-20. | Currently all long term capital assets are eligible for making investment in specified bonds. Further, lockin period of investment was 3 years. | It is proposed that gain arising from transfer of Land or Building or both would be eligible for making investment in long-term specified asset being specified bonds. Now the bonds redeemable after five years and issued on or after 01st April, 2018 would be eligible for deduction. | Major take-away as earlier this deduction was available for all long term capital assets but now applicable only for land and building. | |
| 115BBE w.e.f A Y 2017-18. | Sub-section (2) of said section provides that no deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any provision of the Act in computing his income referred to in clause (a) of sub-section (1) i.e. in case of return filed by the assessee, however not in case of income assessed by Assessing officer. | In order to rationalize the provisions of section 115BBE, it is proposed to amend the said sub-section (2) so as to also include income referred to in clause (b) of sub-section (1), so that it also applies to assessed income by assessing officer. | As per the existing provisions clause (a) where the total income includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income. However, this rider of no allowance of expenditure was contained in subsection (2) which contain only clause (a) and not clause (b). Therefore, assessee may claim that losses or expenditure against addition made u/s 69/68/69A/69B by the assessing officer should be allowable. However, in order to plug the same it is proposed to amend sub section (2) and include clause (b) w.r.e.f A Y 2017-18. | |
| 36, 40A, 43AA, 43CB, 145A, 145B, Amendment in relation to ICDS. w.e.f A Y 2017-18. | The hon’ble Delhi High Court has strike down various provision of ICDS due lack of jurisdiction. | It is proposed to:- i. amend section 36 of the Act to provide that marked to market loss or other expected loss as computed in the manner provided in income computation and disclosure standards notified under sub-section (2) of section 145, shall be allowed deduction. ii. amend 40A of the Act to provide that no deduction or allowance in respect of marked to market loss or other expected loss shall be allowed except as allowable under newly inserted clause (xviii) of sub-section(1) of section 36 iii. insert a new section 43AA in the Act to provide that, subject to the provisions of section 43A, any gain or loss arising on account of effects of changes in foreign exchange rates in respect of specified foreign currency transactions shall be treated as income or loss, which shall be computed in the manner provided in ICDS as notified under sub-section (2) of section 145. iv. insert a new section 43CB in the Act to provide that profits arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method except for certain service contracts, and that the contract revenue shall include retention money, and contract cost shall not be reduced by incidental interest, dividend and capital gains. v. amend section 145A of the Act to provide that, for the purpose of determining the income chargeable under the head “Profits and gains of business or profession,— (a) the valuation of inventory shall be made at lower of actual cost or net realizable value computed in the manner provided in income computation and disclosure standards notified under (2) of section 145. (b) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation. (c) inventory being securities not listed, or listed but not quoted, on a recognised stock exchange, shall be valued at actual cost initially recognised in the manner provided in income computation and disclosure standards notified under (2) of section 145. (d) inventory being listed securities, shall be valued at lower of actual cost or net realisable value in the manner provided in income computation and disclosure standards notified under (2) of section 145 and for this purpose the comparison of actual cost and net realisable value shall be done category-wise vi. insert a new section 145B in the Act to provide that (a) interest received by an assessee on compensation or on enhanced compensation, shall be deemed to be the income of the year in which it is received. (b) the claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. (c) income referred to in sub-clause (xviii) of clause (24) of section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income tax for any earlier previous year. |
The earlier position in view of ICDS has been reinstated with some additional measures w.r.e.f A Y 2017-18. | |
| 193 (Interest on securities) w.e.f 01st April, 2018. | New insertion for TDS on 7.75% GOI Savings (Taxable) Bonds, 2018. | TDS @ 10% with a threshold limit of INR 10,000/-. | – | |
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