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    Changes in Income Tax Act - Budget 18

    NEW PROVISIONS 

    Other than Corporate/Business 

    Sec 16: - 

    This section provides for deduction from income chargeable to tax under the head Salaries. A new clause (ia) is inserted which provides for Standard Deduction of Rs. 40K subject to the amount of salary as deduction. 

    Transport allowance and reimbursement of medical expenses is proposed to be withdrawn. Transport allowance for differently abled person will continue. 

    Sec 10(12A): - 

    This section provides for exemption on partial withdrawal from NPS. The existing benefit is extended to non-employees also. 

    Sec 80TTA: - 

    This section provides for deduction of interest on savings bank account. It is provided that deduction the section is not available to persons covered U/S 80TTB. 

    Sec 80TTB: - 

    Deduction of interest on deposit with banking company/ Co-operative Society engaged in banking business / Post Office of up to Rs. 50,000/- allowed to Senior Citizen. 

    Sec 194A: - 

    This section provides for deduction of tax at source on interest other than interest on securities. It is proposed to provide that in case of senior citizen TDS is applicable on interest in excess of fifty thousand rupees

    Sec 80D:

     

     

     

     

    Individual: -

     

     

     

     

     

    Existing

    Amount

    Proposed

    Amount

    Amount  paid  on  account  of

    Rs. 30,000/-

    Amount paid on account of

    Rs. 50,000/-

    medical expenditure on health

     

    medical expenditure on health

     

    of assessee or any member of

     

    of assessee or any member of

     

    family in aggregate (A)

     

    family in aggregate (A)

     

    Amount  paid  on  account  of

    Rs. 30,000/-

    Amount  paid  on  account of

    Rs. 50,000/-

    medical expenditure on health

     

    medical expenditure on health

     

    of any parent of the assessee (B)

     

    of any parent of the assessee (B)

     

    Aggregate  amount  of  Health

    Rs. 30,000/-

    Aggregate amount of Health

    Rs. 50,000/-

    Insurance Premium and total of

     

    Insurance Premium and total of

     

    A and B

     

     

    A and B

     

    Medical Expenditure on health

    Rs. 30,000/-

    Medical Expenditure on health

    Rs. 50,000/-

    of  very  senior  citizen  not

     

    of senior citizen not covered by

     

    covered by Health Insurance

     

    Health Insurance

     

    Medical Insurance Premium on

    Rs. 30,000/-

    Medical Insurance Premium on

    Rs. 50,000/-

    the health of Senior Citizen /

     

    the health of Senior Citizen

     

    Very Senior Citizen

     

     

     

    HUF: -

     

     

     

     

     

    Existing

    Amount

    Proposed

    Amount

    Amount  paid  on  account  of

    Rs. 30,000/-

    Amount paid on account of

    Rs. 50,000/-

    medical  expenditure  incurred

     

    medical expenditure incurred

     

    on the health of any member of

     

    on the health of any member of

     

    the Hindu undivided family

     

    the Hindu undivided family

     

    Aggregate of Health Insurance

    Rs. 30,000/-

    Aggregate of Health Insurance

    Rs. 50,000/-

    Premium  and

    expenditure

     

    Premium  and  expenditure

     

    mentioned above

     

     

    mentioned above

     

     

     

     

     

     

     

    Health Insurance

    Premium on

    Rs. 30,000/-

    Health Insurance Premium on

    Rs. 50,000/-

    the health of member who is a

     

    the health of member who is a

     

    Senior  Citizen/Very  Senior

     

    Senior  Citizen/Very  Senior

     

    Citizen

     

     

    Citizen

     

     
    It is further provides that where the health premium paid for more than one year proportionate amount should be considered for deduction.
     

    Sec 80DDB: - 

     

    Existing

    Amount

    Proposed

    Amount

     

     

     

     

     

    Amount actually paid for

    Rs. 60,000/-

    Amount actually paid for

    Rs. 1,00,000/-

    medical treatment of specified

     

    medical treatment of specified

     

    disease or ailment of

     

    disease or ailment of

     

    assessee/dependent/any

     

    assessee/dependent/any

     

    member of HUF who is a senior

     

    member of HUF who is a

     

     

    citizen

     

    senior citizen

     

    Sec 80DDB: -

     

     

     

     

    Existing

    Amount

    Proposed

    Amount

    Amount actually paid for

    Rs. 60,000/-

    Amount actually paid for

    Rs. 1,00,000/-

    medical treatment of specified

     

    medical treatment of specified

     

    disease or ailment of

     

    disease or ailment of

     

    assessee/dependent/any

     

    assessee/dependent/any

     

    member of HUF who is a senior

     

    member of HUF who is a

     

     

    citizen

     

    senior citizen

     

     

    Sec 115JC: - 

    This section provides for levy of tax on adjusted total income in case of other than company. It is proposed to amend the said section so as to provide that for the assessee being a person which, is a unit located in an International Financial Service Centre and derives its income solely in convertible foreign exchange, the rate of tax shall be nine per cent. 

    Corporates /Business 

    Sec 36(1): - 

    This section provides for deduction from the income chargeable U/S 28. A new clause (xviii) is inserted to provide that marked to market loss or other expected loss computed in accordance with ICDS notified U/S 145(2) be allowed as deduction. (W E F 01-04-2017) 

    Further no deduction will be allowed in respect of marked to market loss or expected loss except as mentioned above (Sec 40A (13)) (W E F 01-04-2017) 

    Sec 43(5): - 

    This section provides for definition of Speculative Transaction. A new proviso is inserted which provides (for clause (e) of the first proviso) that for trading in agricultural commodity derivatives which are not subject to CTT is not a speculative transaction. 

    Sec 43AA: - 

    A new section is inserted to provide for treatment of income or loss arising out of change in foreign exchange rates of foreign currency transactions be computed with reference to ICDS notified U/S 145(2). 

    Sec 43CA: -

    This section for determination amount of consideration in case transfer of stock in trade being building, land or both for consideration less than value adopted or assessed or assessable for payment of stamp duty. A new proviso is inserted which provides for adoption of actual consideration received or accruing as a result of transfer for stamp duty value in case where such value does not exceed 105% of actual consideration. 

    Further adoption of stamp duty value on the date of agreement as per Sec 43CA (3) will apply only in case where the amount of consideration or part thereof is received way of account payee cheque or account payee draft or ECS through bank account. 

    Sec 43CB: - 

    A new section inserted to provide for computation of income arising from Construction Contract or a Contract for providing services as per percentage of completion method as per ICDS notified U/S 145(2). 

    Profits and gains arising from a contract for providing services with duration of not more than ninety days shall be determined on the basis of project completion method and in case of services involving indeterminate number of acts over a specific period of time shall be determined on the basis of straight line method. 

    It provides further contract revenue shall include retention money and contract cost should not be reduced by income in the nature of interest, dividends, capital gains. (W E F 01/04/2017) 

    Sec 44AE: - 

    This section provides for computation of income from transportation business on presumptive basis. It is proposed to compute presumptive income @ Rs. 1000/- per ton per month or part thereof in case of heavy goods vehicle or higher amount actually earned whichever is higher. 

    In case other than heavy goods vehicle an amount of Rs. 7500/- per month or part of the month or higher amount actually earned whichever is higher. 

    Sec 49(9): - 

    This section provides for Cost of Acquisition of Capital Asset. A new subsection (9) is inserted which provides that cost of acquisition in case where inventory is converted in to Capital Asset shall be the FMV on the date conversion determined in prescribed manner. 

    Sec 50C: -

    This section provides determination of consideration in case transfer of Capital Asset, being land, building or both for a consideration less than value adopted or assessed or assessable for payment of stamp duty. 

    A new proviso is inserted which provides for adoption of actual consideration received or accruing as a result of transfer for stamp duty value in case where such value does not exceed 105% of actual consideration.

    Sec 54EC: - 

    This provision provides for exemption from LTCG. It is amended to provide for that the exemption under this section is available to gains from transfer of Long-Term Capital Asset, being land or building or both. 

    The section further amended to provide for investment in any bonds redeemable after five years issued on after 01/04/2018 of NHAI/REC/ Bond notified in this behalf. 

    Sec 56: - 

    This section provides for chargeability of income under the head other sources. A new sub-clause inserted in Sec 56(2)(X) where in it is provided that income is chargeable under this clause in case the difference between Stamp Duty Value and consideration is more than highest of Rs. 50K or 5% of actual consideration. 

    It is further provided that transaction of money or property between a wholly owned subsidiary and its holding company is not subject to tax U/S 56. 

    Sec 79: - 

    This section impose restriction on carry forward and set off losses in case of change in shareholding more than 51%. 

    It is proposed to amend to provide that any change in shareholding in case of company whose resolution plan has been approved under IBC, 2016 is not subject to Sec 79. 

    Sec 80AC: - 

    Any deduction U/S 80-IA/80-IAB/80-IB/80-IC/80-ID/80-IE be admissible for the period 01/04/2006 before 01/04/2018 only when the return of income for such assessment year is filed on or before the due date specified U/S 139(1). 

    It is further provided that deduction under the heading C- Deduction in respect of certain incomes under Chapter VIA be allowed in relation to assessment year commencing on or after 01/04/2018 be allowed only if the return of income is filed within the due date specified U/S 139(1) 

    Sec 80-IAC: - 

    This section for deduction in case of eligible start up. It is proposed to amend the term eligible business by providing that business carried on eligible start up engaged in innovation, development or improvement of product or processes or services or a scalable business model with high potential of employment generation or wealth creation. 

    It further provides that Eligible Start- up means a company or LLP engaged in eligible business incorporated on or after 01/04/2016 but before 01/04/2021. 

    Sec 80JJAA: - 

    This section provides for deduction on additional wages paid. It is provided that in case of assessee engaged in the business of manufacturing of apparel or footwear or leather products additional employee means inter-alia who has worked for 150 days during the previous year. 

    It further provided that an employee who has not worked for minimum period of 240 /150 days during previous year but has worked for 240/150 days in the succeeding year shall be deemed to have been employed in the succeeding year. 

    Sec 80PA: - 

    Producer Company having a total turnover of less than one hundred crore rupees in any previous year deriving profits and gains from marketing of agricultural produce grown by the members or purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to the members or processing of agriculture produce of members be allowed a deduction of an amount equal to one hundred per cent. of the profits and gains attributable to such business for the previous year relevant to an assessment year commencing on or after the 01/04/2019 but before the 01/04/ 2025. 

    Sec 115BBE: - 

    This section provides for taxability of Income referred to in Sec 68/69/69A/69B/69C/ 69D. It is provided that no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income declared by the assessee in the return of income as well as income determined by the AO under the above-mentioned sections. (W E F 01/04/2017 

    Sec 115JB: - 

    This section for taxability of book profit. A new clause (iih) is inserted which provides that the aggregate amount of unabsorbed depreciation and brought forward loss (excluding depreciation) of a company of a company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code, 2016 be reduced while computing book profits. 

    Sec 115R: - 

    This section provides for levy of additional tax on distribution of income. It is proposed to amend the said section so as to provide that where any income is distributed to any person by an equity-oriented fund, the fund shall be liable to pay additional income-tax at the rate of ten per cent. on income so distributed. 

    Non-Resident and Cross Border 

    Sec 9(1): - 

    This section provides income deemed to accrue or arise in India. Income from business connection in India is deemed to accrue or arise in India.

    The existing definition of Business Connection (Sec 9(1)(i)) read with explanation 2) covers transaction carried on through agent. An amendment is proposed to the definition of Business Connection. It provides that Business Connection shall include any business activity carried through agent who habitually concludes contracts or habitually plays the principal role in concluding the contracts by non-resident subject to satisfaction of conditions mentioned there in. 

    The above change covers the transactions carried by physical presence of agent. 

    A further change is proposed to cover the transactions carried electronically which do not require physical presence of itself or any agent in India. It provides that Business Connection include significant economic presence in India. 

    The Significant Economic Presence in India mean download of data or software in India subject to monetary limit to be prescribed or systematic continuous solicitation of its business activities or engaging in interaction with such no. of users as may be prescribed. 

    Sec 10(6D): - 

    Section 10 provides for exclusion of income from Gross Total Income. A new sub-section 6D is inserted which provides that income arising to non-resident by way of royalty or fees for technical services rendered in or outside India to the National Technical Research Organization is not chargeable to tax. 

    Sec 10(48B):- 

    This section provides for exemption income accruing or arising by foreign company on account of left over stock of crude oil in facility in India. It is further provided that the benefit of exemption is extended to income arising on termination of agreement or arrangement. 

    Sec 115JB: -

    This section for taxability of book profit. A new explanation 4A is inserted which clarifies that the provisions of this section shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, where its total income comprises solely of profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the rates specified in those sections. (W E F 01/04/2001) 

    Sec 286: - 

    This section provides for furnishing of report in respect of international group. It is proposed to amend that CbCR in case of parent entity or alternative reporting entity resident in India or Constituency entity resident in India having non-resident parent entity outside India which is not required to file CbCR report in their country or territory shall file the report within 12 months from the end of reporting accounting year.(W E F 01/04/2017) 

    ICDS 

    Sec 145A: - 

    New section 145A provides that for the purpose of determining the income chargeable under the head Profits and gains of business or profession 

    ?Inventoryshall be made at lower of actual cost or net realizable value in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145; 

    ?Valuationof purchase and sale of goods or services and of inventory shall include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; 

    ?Valuationof inventory being un listed securities or listed but not quoted on a recognized stock exchange with regularity from time to time, shall be valued at actual cost initially recognized in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145; 

    ?Valuationof inventory being listed security regularly quoted be valued at lower of actual cost or net realizable value in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145 

    Sec 145B: - 

    Interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. 

    It is further provided that claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realization is achieved. (W E F 01/04/2017) 

    New Levy

    Sec 28: - 

    This section provides for chargeability of income under the Head Profits and Gains from Business or Profession. A new clause(via) is inserted which provides for taxability of conversion of Stock in Trade into Capital Asset. 

    As a result, profits or gains arising from conversion of inventory in to capital assets or its treatment as capital asset shall be charged to tax as a business income. The FMV of inventory on the dated of conversion determined in the prescribed manner shall be deemed to be full value consideration. 

    Sec 2(24) which defines the term ‘Income’ is amended thereby included the receipt mentioned in Sec 28 (via). 

    A new sub-clause(e) is inserted in Sec 28(ii): - 

    Any Compensation received or receivable (Revenue or Capital) in connection with the termination of or modification of the terms and conditions of any contract relation to business is made chargeable to tax. 

    Sec 56: - 

    This section provides for chargeability of income under head other sources. A new clause (XI) is inserted to provide that compensation or other payment due to or received by any person in connection with termination of his employment or modification of terms and conditions is chargeable to tax U/S 56. 

    Sec 112A: - 

    Capital gains arising from transfer of long-term capital asset being equity share in a Company or Unit of Equity Oriented Fund or Unit of Business Trust be chargeable to tax @10% of gain exceeding Rs. 1 Lakh. (W E F 01/04/2018) 

    Capital gain shall be computed without giving indexation benefit. 

    This section is not applicable in case transfer undertaken on recognized stock exchange located in IFSC where the consideration for such transfer is received or receivable in foreign currency. 

    Cost of acquisition in case of long-term capital asset acquired by assessee before 01/02/2018 shall be computed with reference to FMV as on 31/01/2018. 

    Cost of acquisition in such case shall be highest of the following: - 

    • Actual Cost of Acquisition; (ii)Lower of the following: - 
    1. FMV of the such asset;
      1. Full Value Consideration received or accruing as result of transfer 

    The provisions the Sec 112A are applicable to Domestic Companies referred to in Sec 115BA as we as FII referred to in Sec 115AD. 

    Sec 2(22) Deemed Dividend: - 

    This section provides for definition of dividend for the ITA. An explanation 2A is inserted by providing that in case of amalgamation of company the accumulated profits of the amalgamated company shall include profits, whether capitalized or not or loss of the amalgamating company as on the date of amalgamation. 

    This definition has impact on clause (a)/(b)/(d)/(e) of section 2(22).

    It is further provided that dividend referred to Sec 2(22) (e) shall be charged to Dividend Distribution Tax (DDT) @30% - Sec 115-O 

    Education Cess:- 

    Education Cess on income-tax and Secondary and Higher Education Cess on income-tax shall be

    discontinued. A new cess called Health and Education Cess shall be levied @4% of income-tax including surcharge in all cases. 

    Charitable Institutions 

    Sec 10(23C): - 

    This section provides for exemption to various funds/ educational/medical institutions subject to 

    conditions. A new proviso is inserted to provide that in determining the application of income (for educational institution/medical institution) the effect of provisions of non-compliance of TDS provisions U/S 40(a)(ia) and payment more than Rs. 10k U/S 40A(3)/(3A) should also be taken into consideration. 

    Sec 11: - 

    This section provides for exemption to income of Charitable Institution. A new explanation is inserted which provides that in determining the amount of application of income the effect of provisions of non-compliance of TDS provisions U/S 40(a)(ia) and payment more than Rs. 10k U/S 40A(3)/(3A) should also be taken into consideration. 

    Sec 10(46): - 

    This section provides for exemption to specified income arising to a body or authority or Board or Trust or Commission (by whatever name called), not engaged in any commercial activity, established or constituted by or under a Central, State or Provincial Act, or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public. 

    It is proposed to amend the said clause so as to provide such exemption to specified income arising to a class of body or authority or Board or Trust or Commission also. 

    Procedural

    Sec 139A: - 

    This section provides that every person specified therein and who has not been allotted a permanent account number shall apply to the Assessing Officer for allotment of a permanent account number. 

    A new clause (v) in the said sub-section so as to provide that every person, not being an individual, which enters into a financial transaction of an amount aggregating to two lakhs fifty thousand rupees or more in a financial year shall apply for PAN. 

    It is further proposed to insert a new clause (vi) so as to provide that the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer of the person referred to in clause (v), or any person competent to act on behalf of the person referred to in clause (v), shall also apply to the Assessing Officer for the allotment of permanent account number. 

    Sec 140: - 

    This section provides for return by whom to be verified. It is proposed to amend the said section so as to provide that where in respect of a company an application has been admitted by the Adjudicating Authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code, 2016, the return shall be verified by the insolvency professional appointed by such Adjudicating Authority. 

    Sec 143: - 

    This section provides for processing of return of income after making the adjustments specified. A new proviso is inserted to provide that no adjustment under sub-clause (vi) of the said clause shall be made in respect of any return furnished for the assessment year commencing on or after the 01/04/ 2018. 

    Sec 253: - 

    This section provides for appeals to the Appellate Tribunal. It is proposed to provide that an order passed by a Commissioner (Appeals) under section 271J also appealable to the Appellate Tribunal 

    Sec 271FA: - 

    This section provides for penalty for failure to furnish statement of financial transaction or reportable 

    account. It is proposed to amend the said section so as to increase the penalty from one hundred rupees to five hundred rupees and from five hundred rupees to one thousand rupees, for each day of continuing default. 

    ANNEXURE:- Income Tax Rates for Individuals/HUF

    Individual/HUF

     

    Resident Individual/HUF

    Resident Individual /HUF

    (Less than 60 years of

    (Age of 60 or more)

    (Age of 80 or more)

    age)/HUF/AOP/BOI/AJP)

     

     

     

     

     

    Income

    Rates

    Income

    Rates

    Income

    Rates

     

     

     

     

     

     

     

    Upto 2,50,000

    NIL

    Upto 3,00,000

    Nil

    Upto 5,00,000

    NIL

     

     

     

     

     

     

     

    Rs. 2,50,000 –

    5% of Total

    Rs. 3,00,000-

    5% of Total

    Rs. 5,00,000 –

    20% of (total

    Rs. 5,00,000

    Income –

    Rs.5,00,000

    Income –

    Rs. 10,00,000

    income -

     

    2,50,000

     

    3,00,000

     

     

    5,00,000)

     

     

     

     

     

     

     

    Rs. 5,00,000 –

    Rs12,500 +

    Rs. 5,00,000 –

    Rs10,000 +20%

    Above

    1,00,000 +

    Rs. 10,00,000

    20% of (total

    Rs. 10,00,000

    of (total

    Rs. 10,00,000

    30%of total

     

    income-

     

    income5,00,000)

     

    income -

     

    Rs. 5,00,000)

     

     

     

     

    5,00,000)

    Above Rs.

    Rs 1,12,500 +

    Above Rs.

    Rs 1,10,000+30%

    Rebate of Rs. 2500/- Is available if

    10,00,000

    30% Of (total

    10,00,000

    of (total income-

    Total  income

    of  resident

     

    income -Rs.

     

    Rs. 10,00,000

    individual  does  not  exceed

     

    10,00,000)

     

     

     

    Rs.3,50,000

     

     

     

     

     

     

     

     

    No change for the tax rates and Income tax slabs for Individuals/ HUF for the Asst. Year 2019-20.

    Other Important Points in Tax Structure: (for Individuals & HUF)

     

     

    ?Surcharge

     

     

     

     

     

    ?Healthand Education Cess of 4% is to be levied on personal income tax

     

     

     

     

     

     

     

     

    Total Income

     

    Surcharge

     

     

     

     

     

     

     

     

     

     

     

    > Rs.50 Lakhs – 1 crore

    10% of Total Income

     

     

     

     

     

     

     

    > 1 crore

     

    15% of Total Income

     

     

     

     

     

     

     

     


     

    Income Tax rates for entities:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Business Entity

     

     

     

    Income Tax @

     

     

     

     

     

     

     

     

     

     

     

    Firms/LLP/Local Authority

     

     

     

    30%

     

     

     

     

     

     

     

     

     

     

     

    Domestic Company up to Turnover of Rs. 250 Crores

     

     

    25%

     

     

     

     

     

     

     

     

     

     

     

    Domestic Company Turnover > Rs. 250 Crores

     

     

     

    30%

     

     

     

     

     

     

     

     

     

     

     

    Foreign Company

     

     

     

    40%

     

     

     

     

     

     

     

     

     

     

    The Rate of Surcharge

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    The Rate of Surcharge

     

    Income

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Up to Rs. 1

    Crore1 Cr to

     

    > 10Cr

     

     

     

     

     

     

    10 Cr

     

     

     

     

     

     

     

     

     

     

     

    Domestic Company

    Nil

    7%

     

     

    12%

     

     

     

     

     

     

     

     

     

     

    Other than Domestic Company

    Nil

    2%

     

     

    5%

     

     

     

     

     

     

     

     

     

     

     

     
    The Health & Education cess @ 4% shall be computed on aggregate of Income tax & surcharge.

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