Salient Features of Direct Tax Proposals in Union Budget 2017
The salient features of Direct Tax proposals are summarised below:
- Three concessions in the scheme of Income Tax exemption for affordable housing:
- Area of 30 and 60 Sq.mtr. to be counted as carpet area and not built-up area;
- 30 Sq.mtr. only in 4 metropolitan city limits and 60 Sq.mtr. for the rest of the country;
- Completion period extended from 3 years to 5 years.
- Tax on Notional rental income for builders to be calculated only after 1 year from the end of the year in which completion certificate is received.
- Changes in Capital Gain taxation for immovable properties:
- Holding period reduce for computation of long term capital gain from three years to two years
- Base year for counting the cost of property shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property.
- Basket of financial instrument in which capital gain can be invested without payment of tax to be expanded.
- For joint development agreement, the liability to pay capital gain tax will arise in the year in which project is completed.
- For Andhra Pradesh capital, land belonging to owners as on 2.6.2014 to be exempted from capital gain if the same is offered under land-pooling mechanism.
Measures for stimulating growth:
- Concessional withholding rate of 5 per cent. for interest received by foreign entities on loans given in India to be continued for another 3 years beyond 30.6.2017.
- Start-ups to get two relaxations under the scheme of Income Tax holiday given last year.
- The condition of continuous holding of 51 per cent. voting rights to be relaxed as long as the original investment of promoter is not diluted.
- Exemption available for three years out of any 7 years from the date of establishment instead of 3 out of 5 years
- The period of carry forward of MAT/AMT credit increased from 10 years to 15 years.
- The corporate income tax to be reduced from 30% to 25% for companies with turnover upto Rs.50 crore in 2015-16. This will benefit 96% of existing 6.67 lakh companies. This will result into tax saving of 16.67% for these companies.
- Deduction for provision for NPA of Banks to be increased from to 8.5% instead of 7.5% of profit.
- In case of NPA of non-scheduled cooperative banks, interest to be recognised as income only when received.
Promoting Digital Economy:
- In the presumptive income tax for small traders, income to be taken as 6% of turnover which is received by digital or banking means.
- Cash expenditure allowable to be reduced to Rs.10,000 from the existing Rs.20,000.
- Cash transaction of above Rs.3 lakh not to be permitted. The penalty of equal amount to be levied in case of breach.
Transparency in Electoral Funding:
- The cash donation to political parties from one person limited to Rs.2,000/-.
- Electoral Bond to be introduced for facilitating donation to political parties from explained sources.
- Political parties to file their return in time limit prescribed in the Income Tax Act.
Ease of Doing Business:
- Domestic transfer pricing to be applied only if one of the two companies enjoys specified profit-linked deduction.
- The audit limit for business entities opting for presumptive scheme to be increased from Rs.1 crore to Rs.2 crore.
- Individuals and HUFs not required to keep books of accounts if their turnover is up to Rs.25 lakhs or income is upto Rs.2.5 lakhs.
- Investment in Category 1 and 2 foreign portfolio investors registered with SEBI to be exempted from provisions of indirect transfer.
- TDS of 5% not to be deducted for individual insurance agents if they certify their income to be below taxable limit.
- Professionals in presumptive scheme to pay advance tax only in one instalment in March instead of four.
- The time limit for revising a tax return reduced to 12 months. Also time limit for completion of scrutiny will be brought down to 12 months from Assessment Year 2019-20 onwards.
Personal Income Tax:
- Personal income tax for people with income in the slab of 2.5 lakh to 5 lakh to be reduced to 5% instead of 10%. This will reduce their tax liability to half while all other tax payers above this slab will also be benefited in terms of lesser tax of Rs.12,500 per individual (revenue loss ofRs.15,500 crores).
- Surcharge of 10% to be levied on individuals with income between Rs.50 lakhs to Rs.1 crore (revenue gain of Rs.2,700crore).
- TCS exemption for state transport corporation in respect of purchase of vehicles.
- Income of Chief Minister’s relief fund exempt from tax.
- Penalty on accountant, registered valuer and merchant banker for furnishing incorrect information.
- In order to ensure timely filing of return and expeditious issue of refund, a fee shall be levied for delay in filing of return.
|Budget gives a major push to Digital Economy; proposes No Cash Transaction above Rs 3 lakh|
- In a bid to give a push to Digital Economy and weed-out corruption and black money, Government has decided that no transaction above Rs 3 lakh will be permitted in cash.
- Accepting a suggestion by Special Investigation Team on Black Money to ban cash transactions above Rs 3 lakhs, the Finance Minister has proposed an amendment to the Income-tax Act in the Finance Bill.
- Government will launch two new Schemes to promote the usage of BHIM App i.e, Referral Bonus Scheme for individuals and a Cashback Scheme for merchants.
- BHIM App was launched to promote digital transactions and will unleash the power of mobile phones for digital payments and financial inclusion.
- Aadhar Pay, a merchant version of Aadhar Enabled Payment System, will be launched shortly.
- This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones.
- A Mission will be set-up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards.
- Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017.
- They will be encouraged to introduce 20 lakh Aadhar based PoS by September 2017.
- It will have a transformative impact in terms of greater formalisation of the economy and mainstreaming of financial savings into the banking system.
- This, in turn, is expected to energise private investment in the country through lower cost of credit.
- The Budget proposed to limit the cash expenditure allowable as deduction, both for revenue as well as capital expenditure, up to Rs 10,000.
- Similarly, the limit of cash donation which can be received by a Charitable Trust is being reduced from Rs 10,000/- to Rs 2000/-.
Other recommendations and plans
- To strengthen and regulate the digital economy, the Finance Minister has proposed to create a Payments Regulatory Board in the Reserve Bank of India(RBI) by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems.
- The Committee on Digital Payments constituted by the Department of Economic Affairs has recommended structural reforms in the payment eco system, including amendments to the Payment and Settlement Systems Act, 2007.
- The Government will undertake a comprehensive review of this Act and bring about appropriate amendments.
- To strengthen the digital payment infrastructure and grievance handling mechanisms the focus would be on rural and semi urban areas through Post Offices, Fair Price Shops and Banking Correspondents.
- Steps would be taken to promote and possibly mandate petrol pumps, fertilizer depots, municipalities, Block offices, road transport offices, universities, colleges, hospitals and other institutions to have facilities for digital payments, including BHIM App.
- A proposal to mandate all the Government receipts through digital means, beyond a prescribed limit, is under consideration.
- The increased digital transactions will enable small and micro enterprises to access formal credit.
- The Government will encourage SIDBI to refinance credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history.