Key Fiscal Highlights of Budget 2018
No change in Tax Rate – Income Tax for all categories of assesses including individuals, HUF, Firms and Companies remain same as laid down in Finance Act, 2017. However, for Domestic Companies having total turnover or gross receipts not exceeding Rs 250 crores in Financial year 2016-17 shall be liable to pay tax at 25% as against present ceiling of Rs 50 crore in Financial year 2015-16.
Cess for FY 2018-2019 – “Education and Secondary and Higher Education Cess” – (2% + 1%) to be discontinued and a new Cess named “Health and Education Cess on Income tax” shall be levied at the rate 4%. The new cess will be applicable for financial year 2018-2019
Taxation on LTCG of Sale of Equity Shares – LTCG exemption under section 10(38) in respect of listed STT paid shares is proposed to be withdrawn and STT paid long term Capital Gain, exceeding one lakh will attract a tax rate of 10% under Section 112A. However, for the long-term capital gain up to 31.1.2018 the cost of acquisition will be taken as Fair Market Value as on 31.1.2018.
Deduction for Salaried Employees – It has been proposed to allow a standard deduction of Rs 40,000/- 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Allowance (except in case of differently abled persons) and reimbursement of medical expenses is proposed to be withdrawn.
Certain cases in which entities to apply for PAN – In order to use PAN as Unique Entity Number (UEN) for non-individual entities, it is proposed that every person, not being an individual, which enters into a financial transaction aggregating to Rs 2,50,000 or more in a financial year shall be required to apply for PAN. Also, all directors, partners, members or any person competent to act on behalf of such entities shall also apply to for allotment of PAN.
Rationalization in Capital Gains arising on Sale of Immovable Property – At present, while taxing income from capital gains business profits other sources arising out of transactions in immovable property, the sale consideration or stamp duty value, whichever is higher is adopted. The difference is taxed as income both in the hands of the purchaser and the seller. It has been pointed out that this variation can occur in respect of similar properties in the same area because of a variety of factors. So in order to minimize hardship in case of genuine transactions provision of Section 43CA, 50C and 56(2)(x) have proposed to be amended to allow 5% of sale consideration in variation vis a vis stamp duty value on account of plot location or other such, disadvantages .
Manner of payment in respect of certain exempt entities– In order to encourage a less cash economy and to reduce the generation and circulation of black money, restrictions on payments made in cash by charitable or religious trusts or institutions has been proposed.
Rationalization of the provisions of section 54EC – Benefit of investment in Bonds u/s 54EC has been proposed to be restricted to Capital gain on land and building only. Also, the period of holding for such long-term specified asset has been proposed to increase to 5 years.
Compulsory Filing of Return -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 whether tax liability exceeds Rs 3000 or not.
E- Assessment for Transparency – A new Section 143(3A) has been proposed to prescribe a new scheme for the purpose of making assessments by eliminating the interface between the Assessing Officer and the assesse.
No Adjustment on Mismatches – In order to restrict the scope of adjustments on account of mismatch with 26AS and 16A while processing of Returns under section 143(1), a new proviso has been proposed.
Deemed Dividend Taxability – For clarity and certainty in the taxation of deemed dividends, it has been proposed to be tax deemed dividend in the hands of the company itself as Dividend Distribution of tax @ 30%.
Increase in Penalty – In order to ensure compliance of the reporting obligations, it has been proposed to increase penalty for non -filing financial return as required under section 285BA from Rs 100 / day to Rs 500/day.
Amendments in relation to notified Income Computation and Disclosure Standards. (ICDS)
- Marked to market loss or other expected loss computed as per ICDS to be allowed under section 36.
- 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 under new proposed Section 43AA
- Construction contract or a contract for providing services shall be determined on the basis of percentage of completion method except for certain service contracts under new proposed Section 43CB