Budget 2018 - Direct tax - Birds eye view

[CS Swati Dodhi]

1. No change in Tax Rate. All persons including individuals, HUF, Firms and Companies to pay same tax .  Education cess is being increased from 3 to 4 % to be known as Education and Health cess.

2. For Domestic Companies having total turnover or  gross receipts  not exceeding  ₹ 250  crores in Financial year 2016-17 shall be liable to pay tax at 25% as against present ceiling of ₹ 50 crore  in Financial year 2015-16.

3. Long term Capital gain exemption under section 10(38) in respect of listed STT paid shares being withdrawn.

4. Capital gain up to 31.1.2018 shall not be taxed as cost of acquisition will be taken as Fair Market Value as on 31.1.2018.

5. Tax on STT paid long term capital Gain will be 10% under Section 112A. Further such tax will be liable for TDS.

6. Standard Deduction of ₹ 40,000 for salaried employees.Benefit of transport allowance of ₹ 19,200 and Medical Reimbursement  of ₹ 15,000 under Section 17(2) are being withdrawn. Thus net benefit to salaries class only ₹ 5,800

7. Provision of Section 43CA, 50C and 56(2)(x) being amended to allow 5%  of sale consideration in variation vis a vis stamp duty value. On account of location, disadvantage etc.

8. Provision of section 40(ia) and 40A(3) and 40A(3A)are being made applicable to Charitable Trust . Hence expenditure incurred without deduction of tax and in cash will not be eligible as application of income under section 10(23C) and section 11(1)(a).

9. Agriculture Commodity Derivates income /loss  also not to be considered as speculative under section 43(5).

10. Income Computation and Disclosure Standards(ICDS) being given statutory backing in view of decision of Delhi High Court decision.

11. Marked to market loss computed as per ICDS to be allowed under section 36.

12. Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA.

13. Construction Contract income to be computed on percentage completion method as per ICDS.

14. Valuation of Inventorty including Securities  to be as per ICDS.

15. Interest on compensation, enhanced compensation. Claim or enhancement claim and subsidy, incentives to be taxed in the year of receipt only as per new Section 145B.

16. Conversion of stock in trade to capital asset to be charged as business income in the year of conversion on Fair Market value on the date of conversion.

17. 54EC benefit of investment in Bonds to be restricted to Capital gain on land and building only. Period of holding being increased from 3 years to 5 years.

18. PAN to be obtained by all entities  including HUF other than individuals in case aggregate of financial transaction in a year is ₹ 2,50,000 or more. All directors, partners, members of such entities also to obtain PAN.

19. All companies irrespective of income to file return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact weather it has tax liability of ₹ 3,000 or not.

20. Assessments to be E assessment under new section 143(3A)

21. No adjustment under section 143(1) while processing on account of mismatch with 26AS and 16A.

22. Deemed dividend to be taxed in the hands of the company itself as Dividend Distribution of tax @ 30%.

23. Penalty  for non filing financial return as required under section 285BA being increased to ₹ 500 per day .