The
Finance Bill, 2017 which was introduced in the Lok Sabha on 1st
February, 2017 which has now been made Finance Act 2017 w.e.f. 1st
April, 2017 after receiving the assent of the President of India on 31st
March, 2017.
Major
changes in the Finance Act, 2017
Income Tax Rate for the
AY 2018-19 (FY 2017-18)
For
individual tax payer the new slab of surcharge of 10% for Total Income of Rs.
50 Lacs to Rs. 100 Lacs has been introduced. Whereas for the income exceeding
Rs. 100 Lacs, the surcharge shall be 15% of total income. Presently a tax
rebate of Rs. 5000/- is allowed if the total income does not exceed Rs.
5,00,000/-. With effect from 01/04/2017, the limit has been reduced to Rs.
2500/- up to the total income of Rs. 3,50,000/-.
In
case of companies, where the total turnover or gross receipt does not exceed
Rs. 50 Crore during FY 2015-16, the tax rate would be 25% for FY 2017-18.
Applicability of Tax
Deducted at Source (TDS) Rate for FY 2017-18
The
Finance Act, 2017 now specifies that every individual/HUF, not covered by Tax
Audit Provisions, shall be liable to deduct TDS at the rate of 5%, if the
monthly rent exceeds Rs. 50,000/- per month as compared to the earlier
provision wherein the individual/HUF who comes under the tax audit provision
(Turnover exceeding Rs. 1 Crore) were liable to deduct TDS on rent (whether
used for business or residence) if the total rent exceeds Rs. 1,80,000/- per
annum.
Provisions w.r.t
Capital Gains
Holding Period of
Capital Asset:
The
Finance Act has reduced the holding period of Land/Building to 24 months. For
various other assets such as All listed Shares, Units of Equity Oriented Mutual
Funds and Securities the holding period has been reduced to 12 months and for
any other type of capital asset including units or Debt Oriented Mutual Fund
the period has been reduced to 36 months.
Exemption on Sale of
Long Term Capital Gain on Equity Shares
With
the Finance Act, 2017 coming into force one of the major amendment that has
been made is w.r.t. exemption provided on Sale of Long Term Capital on Equity
Shares (after paying Securities Transaction Tax STT) which shall be subject to
the following conditions –
- The shares should have been purchased
after paying STT if these were acquired after 01/10/2004.
- However, the above mentioned condition
would not be applicable if the acquisition is out of IPO, Follow-on IPO, Right
Issue or Bonus issue for which separate notification would be issued by
Government.
Applicability of Joint
Development Agreement on Land/Building owned by Individual/HUF
The
Finance Act has tried to curb the problems faced by the owner’s w.r.t. Capital
Gain liability which is triggered as soon as the Joint Development Agreement
(JDA) is entered and possession of the property is handed over for development
to developer, though the sale of the developed property which might take
several years. Thus, to address such problems, new provisions under section 45
(5A) has been inserted in Income Tax Act, 1961 which lays down the following
conditions-
a)
There should be a registered agreement between the owner of the Land or
Building or both and developer, to develop the real estate in consideration of
land or building or both or part in cash.
b)
Capital gain shall be chargeable to 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 For this purpose, the stamp duty value shall be the value on the
date of issuing the completion certificate.
Shifting of Base Year
for Computation of Capital Gains
The
Finance Act, 2017 has provided the option to assessee to substitute the fair
market value (FMV) as on 01/04/2001 in case of of asset acquired prior to
01/04/2001. Earlier this date was 01/04/1981.
Capital Gain
applicability for Unquoted Share
With
the introduction of new Section 50CA w.e.f. 1st April, 2017, the
Fair Market Value (FMV) would be deemed to be the full value of consideration
if actual sale consideration is less than the FMV on the date of sale of
shares. Thus, the both seller and buyers would have to pay tax on the
difference if the FMV is higher than the actual consideration.
Tax Provisions on
Acquisition of Asset without consideration or inadequate consideration by
firms/Association of Persons (AOP) and widely held companies
Until
the present tax norms, firms, AOP and widely held companies were not liable to
tax on difference between Fair Market Value (FMV) and actual consideration.
The
recent Finance Act, 2017 now provides that firms/AOPs and widely held companies
to pay tax under section 56(2) on the difference if the Fair Market Value is
higher than actual consideration of movable or immovable asset. However trusts,
transactions between relatives, HUF partition etc. are still out and not liable
to pay the tax on the difference amount.
Setting off of Interest
on Housing Loan on Rented Properties
The
present tax structure allows the setting off of interest on housing loans in
respect of let out properties against other income without any limit. With the
Finance Act, 2017 in place, the loss under the `Income from House Property’
would be kept limited to Rs. 2,00,000/- for adjustment against other income
head and balance loss, if any, would be allowed to be carried forward for next
8 years for setting off against the same head of income under the `Income from
House Property’. Such carried forward loss would be allowed to be setoff
against `Income From House Property’ without limit of Rs. 2,00,000/-.
Amendments related to
Trust
The
Finance Act, 2017 has also provided for various amendments related to Trust,
w.e.f. 1st April, 2017 Trusts are required to file their Income Tax
Return if their receipts (before making any deduction for application) exceeds
basic exemption limit i.e. Rs. 2,50,000/- for AY 2018-19.
With
effect from 1st April, 2017, trusts would be allowed to avail the
benefit u/s 11 and 12 only if they file the ITR before the due dates u/s
139(1). Any delay in filing the ITR would disentitle them from the benefits u/s
11 and 12.
It
has now been provided that a trust registered u/s 10(23C) or 12AA can not make
`Corpus Donations’ out of its income to any another trust registered u/s
10(23C) or 12AA. Such donations, if made, would not be treated as `Application’
of funds of `Donor’ Trust. Presently also, the `Donations’ out of the
`Accumulated Income’ are not treated as application out of such income.
Further
to the above mentioned amendments, it is also provided under the Finance Act,
2017, if the trust registered u/s 12A/12AA modifies its objectives
subsequently, then trust would be required to obtain fresh registration by
filing an application within 30 days of such adoption or modification of the
objectives.
Provisions made
applicable for Builders/Owners of the Property
Under
the Finance Act, 2017 it has now been decided that from AY 2018-19 onwards, if
any property is held as stock-in-trade and such property is not let out during
the whole (or any part) of the previous year, annual value of such property
shall be taken as ‘Nil’ for a period of 1 year from the end of the FY in which
the certificate of completion of construction of the property is obtained from
the competent authority.
Amendments w.r.t. Cash
Payments and Receipts-
Until
March, 2017, any revenue expenditure incurred in cash (i.e. other than Account
Payee Cheque /draft, NEFT, RTGS, Credit/ Debit Card ) exceeding Rs. 20,000/-
per day per person (Rs. 35000 in case of a transport contractor) was not
allowed as deduction u/s 40A(3). With the Finance Act, 2017 this limit of Rs.
20,000/- has now been brought down to Rs. 10,000/- per day per person. However,
the limit of Rs. 35000/- for payment to transporter continues.
The
Finance Act, 2017 has now added restriction on the payment in cash for the
acquisition of any asset, w.e.f. 1st April, 2017 cash payment
exceeding Rs. 10000/- per day person made otherwise than through Account Payee
Cheque / draft, NEFT, RTGS, Credit/ Debit Card would not be considered as part
of the cost of assets and accordingly such amount would not be considered for
the purpose depreciation nor would be deemed as cost at the time of sale of
such asset.
Provisions
w.r.t. Receipt of Cash in excess of Rs. 2,00,000/-
Section
269ST as introduced in the Finance Act, 2017 has made restrictions on the
receipt of cash of Rs. 2,00,000/- in following situations:-
a)
Aggregate receipt of Rs. 2 Lakhs or more from a person in a day
b)
Aggregate receipt of Rs 2 Lakhs or more in respect of a single transaction
c)
Receipt of Rs 2 Lakhs or more in relation to one event or occasion from a
person
On violation of this
section, a penalty equal to the amount received would be imposed on recipient
(not payer).
In view of the newly
introduced provisions relating to cash sales, the existing provisions (in vogue
since 1.6.2016) relating to collection of TCS @ 1% on cash sales exceeding Rs.2
lakhs ( Rs.5 lakhs, in the case of jewellery) are deleted. Consequently, there
is no need to collect TCS on cash sales exceeding Rs.2 lakhs in cash.
Further, to the above
mentioned the Finance Act, 2017 has also introduced the reporting requirement
on receipt cash payment exceeding Rupees Two Lakh for sale of goods or services
`per transaction’ during 01/04/2016 to 31/03/2017. All assessees who are liable
for tax audit u/s 44AB and are in receipt of cash exceeding Rs. 200000/- have
to report such transaction in separate return form 61A for which due date is
31/05/2017. The delay would invite the penalty of Rs. 100/- per day of delay.
Reporting of Cash
deposited during 09/11/2016 to 30/12/2016:
a) Income Tax Return of
every assessee for FY 2016-17 requires the reporting of Cash deposited during
09.11.2016 to 30.12.2016 (if aggregate cash deposits during the period is Rs 2
Lacs or more)
b) Balance Sheet of
every company assessee for the FY 2016-17 requires reporting of cash details in
the Balance Sheet as per the format disclosed in the Finance Act, 2017.
Maintenance
of Books of Account and Audit Requirement
The Finance Act, 2017
has provided that With effect from 01/04/2017, if the assessee is Individual or
HUF, then these limits would be Rs. 1,50,000/- and Rs. 25,00,000/- respectively
and the limits for other assessees would remain same i.e. Rs. 1,20,000/- and
Rs. 10,00,000/-.
For the AY 2017-18,
assessees who are opting for `Presumptive Taxation Scheme’ are not liable for
audit u/s 44AD, if their turnover is not in excess of Rs. 2 Crore or
professional receipts are not in excess of Rs. 50 Lacs. Company /LLP are liable
for audit if their turnover exceeds Rs. 1 Crore.
Taxability
of Dividends
Presently income by way
of dividend in excess of Rs. 10 Lacs is taxable @ 10% in the case of resident
Individual, HUF and Firm. With effect from 01/04/2017, such dividend would be
taxable in all cases except Domestic Company, trust registered u/s 12A &
Institutions eligible u/s 10(23).
Extension
provided for MAT Credit
Under the Finance Act,
2017 it has now been provided that the MAT Credit can be carried forward upto
15 years (Presently 10 Years) from the year in which such credit becomes
available for adjustment.
Non-Disclosure
of Reasons to Believe to Conduct Search
Presently, the reasons
to believe or reasons to suspect for conducting the `Search’ can be disclosed
at the stage of commencement of assessment proceedings. A retrospective
amendment has been made (with effect from 01/04/1961), section 132 /132A have
been amended to provide that such reasons would not be disclosed to any person
/ tribunal.
Time
Limit for Filing and Revising Return of Income
The Finance Act, 2016
had reduced the time limit of filing late returns (belated returns) by one
year. With effect from the assessment year 2018-19, the time limit for revision
of return has been reduced to the end of assessment year itself.
Aadhar
made Mandatory For Return Filing wef 01/07/2017
Every person who is
eligible to obtain AADHAR number, should quote such number, on or after 1 July
2017, in the Return of income. Furthermore, every person who has been allotted
PAN as on 1st July 2017 must intimate the AADHAR number to the Tax Authority,
failing which, PAN allotted to such person shall be deemed to be invalid.
Kindly note that linking of AADHAR with PAN is not possible, unless name as per
AADHAR and PAN match perfectly. Hence, please take steps to rectify your name
as per AADHAR to match as per PAN.
Fees
for Delay in Submission of ITR
ITRs are required to be
filed on or before 31st July and 30th September as per the applicable to
different assessees. With effect from assessment year 2018-19, there would be
following fees for delayed submission of ITR:
a) Upto Due date: NIL
b) Between 1st August/
1st October upto 31st December 5000/-
c) Between 1st January
to 31st March 10000/-
d) After 31st March
Return filing is not possible
Further such fees would
have to be deposited alongwith tax on the income.
Reopening
of Assessments / ITRs For Last 10 Years In Case of Search
Presently the notice
can be issued for assessing income of last six assessment years preceding the
year in which search is conducted. Now this power has been extended to cover 10
Years ( 6 Years + 4 Years) if the Assessing Officer has documents in possession
which indicates that undisclosed income during these 4 years is not less than
Rs. 50 Lacs. Therefore, every assessee should now keep the records/accounts for
10 years or more.
Income
Computation & Disclosure Standards (ICDS) Applicable For FY 2016-17 Onwards
CBDT has notified the
ICDS which are applicable on Companies, Firms, Individual/HUF(If they are audit
cases u/s 44AB). Some of the main provisions affecting the tax computation are
as under:
a) Inventories as at
31/03/2017 are to be valued at cost or net realizable value, whichever is Cost
shall comprise goods cost, conversion cost and all other costs incurred to
bring them in present condition and location. Only FIFO or Weighted Average
cost formula would be used.
b) Export Sale /Import
Purchases would be recorded in the books of account by converting currency rate
prevailing on the date of transaction. Exchange difference on settlement of
transaction or on conversion thereof on last day of the previous year shall be
recognized as expenses or income.
c) Government Grant
relatable to asset would be reduced from such asset and depreciation would be
provided on such reduced cost.
d) Interest and other
borrowing cost directly linked to fixed assets would be capitalized. Interest
incurred for manufacturing goods/items which require more than 12 months would
also be capitalized.
If the general funds of
the assessee are used for construction of fixed asset, then proportionate
amount of interest (as per the formula prescribed) would be capitalized by
comparing the opening and closing balance of fixed assets.
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