Feb 202018
 

Under the existing regime,  long term capital gains arising from transfer of  long term capital assets,  being  equity shares of a company or an unit of equity oriented fund or an unit of business trusts , is exempt from income-tax under clause (38) of section 10 of the Act.

However, transactions in such long term capital assets carried out on a recognized stock exchange are liable to securities transaction tax (STT).

Consequently, this regime is inherently biased against manufacturing and has encouraged diversion of investment in financial assets. It has also led to significant erosion in the tax base resulting in revenue loss. The problem has been further compounded by abusive use of tax arbitrage opportunities created by these exemptions.

In order to minimize economic distortions and curb erosion of tax base,   it is proposed to withdraw the exemption under clause (38) of section 10 and to introduce a new section 112A in the Act to provide that long term capital gains arising from transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed at 10 per cent. of such capital gains exceeding one lakh rupees .

This concessional rate of 10 per cent. will be applicable to such long term capital gains, if—

  • in a case where long term capital asset is in the nature of an equity share in a company,
  • Securities transaction tax has been paid on both acquisition and transfer of such capital asset; and
  • in a case where long term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, securities transaction tax has been paid on transfer of such capital asset.

Further, sub-section (4) of the new section 112A empowers the Central Government to specify by notification the nature of acquisitions in respect of which the requirement of payment of securities transaction tax shall not apply in the case of equity share in a company.

Similarly, the requirement of payment of STT at the time of transfer of long term capital asset, being a unit of equity oriented fund or a unit of business trust, shall not apply if the transfer is undertaken on recognized stock exchange located in any International Financial Services Centre( IFSC) and the consideration of such transfer is received or receivable in foreign currency.

Further, the new provision of section 112A also proposes to provide the following:—

i) Benefit of indexation is not available on such capital gains: The long term capital gains will be computed without giving effect to the first and second provisos to section 48, i.e. inflation indexation in respect of cost of acquisitions and cost of improvement, if any, and the benefit of computation of capital gains in foreign currency in the case of a non-resident, will not be allowed.

(ii) The cost of acquisitions in respect of the long term capital asset acquired by the assessee before the 1st day of February, 2018 , shall be deemed to be the higher of –

  1. the actual cost of acquisition of such asset; and
  2. the lower of –
  • the fair market value of such asset; and
  • the full value of consideration received or accruing as a result of the transfer of the capital asset.

iii) “equity oriented fund” has been defined to mean a fund set up under a scheme of a mutual fund specified under clause (23D) of section 10 and,—

a) In a case where the fund invests in the units of another fund which is traded on a recognized stock exchange,

  • A minimum of 90 per cent. of the total proceeds of such funds is invested in the units of such other fund ; and
  • such other fund also invests a minimum of 90 per cent. of its total proceeds in the equity shares of domestic companies listed on recognized stock exchange; and

b) in any other case, a minimum of 65 per cent. of the total proceeds of such fund is invested in the equity shares of domestic companies listed on recognized stock exchange.

(iv) Fair market value has been defined to mean –

  1. in a case where the capital asset is listed on any recognized stock exchange, the highest price of the capital asset quoted on such exchange on the 31st day of January, 2018. However, where there is no trading in such asset on such exchange on the 31st day of January, 2018 , the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value; and
  2. in a case where the capital asset is a unit and is not listed on recognized stock exchange, the net asset value of such asset as on the the 31st day of January, 2018.

(v) No deduction is allowed out of such capital gains: The benefit of deduction under chapter VIA shall be allowed from the gross total income as reduced by such capital gains.

(vi) Rebate of section 87A shall not be allowed out of such incomes: Similarly, the rebate under section 87A shall be allowed from the income tax on the total income as reduced by tax payable on such capital gains.

These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

Feb 122018
 

Amendments in budget 2018

Provision in summery Detailed provision Effective from
Income tax slab rates No change No impact
Rate of surcharge for Individual,HUF, AOP, BOI (i) at the rate of ten  per cent. of such tax, where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds fifty lakh rupees but does not exceed one crore rupees, and

(ii) at the rate of fifteen per cent. of such tax, where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees;

(iii) surcharge will also be levied  at the appropriate rates in cases where these persons are liable to tax under section 115JC of the Act.

The above provision are subject to marginal relief.

For FY 2018-19
Use PAN as Unique Entity Number (UEN) Every person, not being an individual, which enters into a financial transaction of an amount aggregating to two lakh and fifty thousand rupees or more in a financial year shall be required to apply to the Assessing Officer for allotment of PAN. lst April, 2018#
Use PAN as Unique Entity Number (UEN) Managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer or any person competent to act on behalf of such entities shall also apply to the Assessing Officer for allotment of PAN. lst April, 2018#
Profits of amalgamated company to include profits of amalgamating company 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. 1st April, 2018#
Dividend distribution tax is payable on deemed dividend it is proposed to delete the Explanation to Chapter XII-D occurring after section 115Q of the Act so as to bring deemed dividends also under the scope of dividend distribution tax under section 115-O. Further, such deemed dividend 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. 1st April, 2018#
Long term capital gain on  equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed @ 10% This concessional rate of 10 per cent. will be applicable to such long term capital gains, if—

i) in a case where long term capital asset is in the nature of an equity share in a company , securities  transaction tax has been paid on both acquisition and transfer of such capital asset; and

ii) in a case where long term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, securities transaction tax has been paid on transfer of such capital asset.

1st April, 2019*
New capital gains tax regime for unit holders of equity oriented funds Where any income is distributed by a Mutual Fund being, an equity oriented fund, the mutual fund shall be liable to pay additional income tax at the rate of ten per cent on income so distributed 1st April, 2018*
FIIs are liable to pay LTCG tax only if such gain exceeding one lacs As in the case of domestic investors, the FIIs will also be liable to tax on such long term capital gains only in respect of amount of such gains exceeding one lakh rupees. The provisions of section 115AD are proposed to be amended accordingly. 1st April, 2019*
Restrictions on payments made in cash by charitable or religious trusts or institutions In order to encourage a less cash economy and to reduce the generation and circulation of black money, it is proposed to insert a new Explanation to the section 11 to provide that for the purposes of determining the application of income under the provisions of sub-section (1) of the said section, the provisions of sub-clause (ia) of clause (a) of section 40, and of sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”. 1st April, 2019*
All types of compensation are taxable as business income u/s 28 and u/s 56 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 1st April, 2019*
Presumptive taxation based on tonnage capacity of trucks In the case of heavy goods vehicle (more than 12MT gross vehicle weight), the income would deemed to be an amount equal to ₹ 1000/- per ton of gross vehicle weight or unladen weight, 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. 1st April, 2019*
Deduction to senior citizen for medical treatment or health insurance premium Now deduction for payment 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 have raised to ₹ 50000/- 1st April, 2019*
Deduction for single premium health insurance policy with coverage more than one year deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided 1st April, 2019*
Enhanced deduction to senior citizens for medical treatment of specified diseases Raise this monetary limit of deduction to Rs 1,00,000/- for both senior citizens and very senior citizens 1st April, 2019*
Interest income in saving account Deduction upto Rs 50,000/- in respect of interest income from deposits held by senior citizens and consequential amendment in TDS section wef  1st April, 2018 1st April, 2019*
Salaried class individuals standard deduction upto Rs 40,000/- or the amount of salary received, whichever is less and withdrawal of exemption in respect of Transport Allowance (except in case of differently abled persons) and reimbursement of medical expenses 1st April, 2019*
Farm Producer Companies (FPC) u/s 80P 100 percent deduction in respect of profit of  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

(ii) 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

For a period of 5 years from 1st April 2018
Deduction to start ups u/s 80-IAC Following changes are made:

(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.

1st April, 2018
Amendment in section 47 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

1st April, 2019*
Additional 30% deduction of new employments  footwear and leather industry For claiming additional deduction period of new employment shall be 150 days in case of following industry:

(i)            apparel industry

(ii)           footwear and leather industry

 

Further, deduction shall also be available for a new employee who is employed for less than the minimum period (150 days) during the first year but continues to remain employed for the minimum period in subsequent year

1st April, 2019*
Trading in agricultural commodity derivatives is taxable as normal business transaction A transaction in respect of trading of agricultural commodity derivatives, which is not chargeable to CTT, in a registered stock exchange or registered association, will be treated as non-speculative transaction. 1st April, 2019*
Income of Foreign Company from sale of leftover stock of crude oil Benefit of tax exemption in respect of income from left over  stock will be available even if the agreement or the arrangement is  terminated in accordance with the terms mentioned therein 1st April, 2019*
Royalty and FTS payment by NTRO to a non-resident 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 1st April, 2018#
Removing MAT consequences as  barrier to rehabilitating companies seeking insolvency resolution 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 1st April, 2018#
New online team based approach towards scrutiny assessment it is proposed to amend the section 143, by inserting a new sub-section (3A), after sub-section (3), enabling the Central Government to prescribe the aforementioned new scheme for scrutiny assessments, by way of notification in the Official Gazette. 1st April, 2018#
Savings from prosecution would not be available to a company No jail or penalty in case tax due is less than 3000/- for failure to furnish return will not be available to a company: 1st April, 2018#
No adjustment in income solely based on form 26AS, 16 and 16A 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. lst April, 2018#
Individuals withdrawing money from NPS Now employees as well as non employees are allowed to withdraw money from NPS with upfront exemption of 40% of total amount payable 1st April, 2019*
Return based benefit of deduction It is proposed to extend the scope of section 80AC to provide that the benefit of deduction under the entire class of deductions under the  heading “C.—Deductions in respect of certain incomes” in Chapter VIA shall not be allowed unless the return of income is filed by the due date. 1st April, 2018*
Stamp valuation shall be not adopted in all cases No adjustments shall be made u/s  43CA (business profits), section 50C (capital gains) and section 56 (other sources) 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 1st April, 2019#
Tax consequences of  stock in trade converted into, or treated as, capital asset (i)    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.

a.     FMV 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;

(ii)   section 2(24) – FMV in the definition of income;

(iii)  section 49 – 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;

(iv)  section 2(42A) – the period of holding of such capital asset shall be reckoned from the date of conversion or treatment.

1st April, 2019#
discontinue the existing 8% Savings (Taxable) Bonds, 2003 with a new 7.75% GOI Savings (Taxable) Bonds, 2018 (i)    The interest received under the new bonds will continue to be taxed.

(ii)   Under section 193 deduction of TDS at the time of making payment of interest on such bonds to residents.

(iii)  No TDS will be deducted if the amount of interest is less than or equal to ten thousand rupees during the financial year

1st April, 2018*

Explanation of effective date:

# These are procedural changes and applicable from the date specified in the finance act. Hence, respective amendment will take effect immediately on the date specified.

* These are changes impacting computation of income where computation takes place in the assessment year in respect of income earned in previous year. Thus, income earned in FY 2018-19 will be computed in 2019-20 and thus these amendments will take effect from 1st Apr 2019 impacting computation of previous year 2018-19 (starting from 1st Apr 2018) and not before that.

Feb 072018
 

Standard deduction on Salary Income

Section 16, inter-alia, provides for certain deduction in computing income chargeable under the head “Salaries”. it is proposed to allow a standard deduction upto Rs 40,000/- or the amount of salary received, whichever is less.

Consequently the present exemption in respect of Transport Allowance (except in case of differently abled persons) and reimbursement of medical expenses is proposed to be withdrawn.

These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

In view of above finance bill 2018 proposes to amend the relevant sections of income tax as given below:

Para 7 of finance bill 2018

In section 16 of the Income-tax Act, after clause (i) [as omitted by section 6 of the Finance Act, 2005], the following clause shall be inserted with effect from the 1st day of April, 2019, namely:––

“(ia) a deduction of forty thousand rupees or the amount of the salary, whichever is less;”.

Implication of above amendments:

Financial consequences:

Before this amendment a salaried class employee can enjoy an exemption of traveling allowance and medical expenses which are available with some conditions and subject to actual expenses incurred by employees for aforesaid purposes. Thus, from financial point of view consequences of the above amendments are summarized as under:

Before amendment After amendment New effect
Medical allowance 15000/- Medical allowance NIL Loss 15000/-
Traveling allowance

@ 1600 per month or part of the month

19200/- Traveling allowance NIL Loss 19200/-
Standard deductions NIL Standard deductions 40000/- Gain 40000/-
Net effect Gain 5800/-

From, pure financial prospective the above amendment seems to give a marginal gain in the computation of tax to an employee but the other consequence with flow to employees due to this amendment would have more importance.

Non – financial implications:

Some of the benefits of the same are listed below:-

  1. Now employees need not to have proof actual incurrence of expense for claiming exemption as standard deduction is unconditionally available to all employees.
  2. Now there would not be any requirement of safe keeping of invoices of medicines and travel tickets for availing exemption.
  3. Henceforth, there is no requirement that one should earn his / her income under the head of traveling allowance or medical allowance.
  4. Money out of deduction (i.e Rs. 40,000/-) can be save and invested anywhere to earn more income which is not possible earlier.

So in essence, the above amendment is for good of employees as far as ease of assessment and processing of return is concern and will benefit the small earner of salary as now deduction is available without expense.

The above amendment will be applicable in computing income for the financial year 2018-19 or while computing income of year 2018-19 onwards. It is worth to note here that income of FY 2018-19 will be calculated in next year, i.e., 2019-20.

Feb 022018
 

Due dates for the Month of Feb 2018
7th
Income Tax
- TDS Payment for January
10th
GST
- Details of outward supplies of taxable goods and/or services effected – GST1 for January
– Return for authorities deducting tax at source – GSTR 7 for January
– Details of supplies effected through e-commerce operator and the amount of tax collected –
GSTR 8 for January
13th
GST
– Return for Input Service Distributor – GSTR 6 for January
15th
Providend Fund
- PF Payment for January
ESIC
- ESIC Payment for January
15th
GST
- Details of inward supplies of taxable goods and/or services effected claiming input tax credit – GSTR 2 for January
20th
GST
- Monthly return on the basis of finalisation of details of outward supplies and inward supplies along with the payment of amount of tax – GSTR 3 for January
– Return for Non-Resident foreign taxable person – GSTR 5 for January
28th
Profession Tax
- Monthly Return (covering salary paid for the preceding month) (Tax Rs. 50,000 or more)
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