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.