JCSS Budget book 2018 Web resolutionjcssglobal.com/budget/Budget 2018-2019.pdf · 1 The Lion begins...

www.jcssglobal .com

INDIA BUDGET 2018

1

The Lion begins to roar.

Make in India started off as a sentiment, an emotion, a

movement. One that hoped to uplift the country from ground

up and impact every individual. It was a dream of many jobs,

thriving small businesses and seamless marketplace.

It was also a matter of choice. One that was largely ignored by

businesses that could effortlessly take it on.

This budget directly aligns that choice to business interests.

And just like that, Make in India will now enter many more

boardroom discussions.

About time.

DIRECT TAX

POLICY

CUSTOMS

2

3

POLICY

Focus on agriculture and an unwavering commitment towards Make in India sums up the philosophy of this Government. With unbridled largesse directed towards the rural and agricultural household coupled with a barely concealed animosity towards imports jeopardising local manufacturing, the Government seems set on its path towards voting itself into power for a second term.

While the budget is filled with the regular hangers-on in the form of rural electrification, irrigation, roads, railways etc. there have been a few pleasant surprises too, at least as far as the intentions are concerned, in the form of health insurance for all and so on.

On the tax front, individual tax payers seemed to have been rewarded with little else other than empathy while corporate tax payers continue to be rewarded for their contribution to the economy in the form of lowered taxes. With the move to GST, the budget offers changes only to Customs while the fate of GST has been left to the wise men of the GST council.

And so, the wheels of the Government continue their roll holding out a hope here, handing out a threat there, all the while trundling towards a promised utopia.

PolicyThe Finance Minister does not mince words when he says ‘My Government is committed for the welfare of farmers’. This together with a focus on rural welfare and wealth thus set the tone for this year’s budget.

Given that this would be the last budget before the next elections, populism was a given. But, even in populism, it is worth reflecting whether it was a well-crafted form of populism or was it just mindless. On balance, one would think that this budget tilts towards the former, rather than the latter.

So let us get a dekko into the Government’s Policy measures.

FarmersThe Minimum Support Price across all crops will be 150% of cost of production

22,000 existing rural haats will be converted into Gramin Agricultural Markets

An Agri-Market Infrastructure Fund with a corpus of ₹ 2,000 crores will upgrade the infrastructure of these Gramin Agricultural Markets

Medicinal and aromatic plant cultivation and associated industries will get a support of ₹ 200 crores

The budget for food processing will be doubled to ₹ 1400 crores

₹ 500 crores will be set aside for Operation Green, on the lines of Operation Flood, to stabilise supplies of tomatoes, onions and potatoes

Bamboo will be promoted with an outlay of ₹ 1290 crores

4

The fisheries sector and the animal husbandry sector will have two new funds with a corpus of ₹ 10,000 crores.

Farm credit will be increased to ₹ 11 lakh crores

The Lower and Middle ClassThe initial target to provide free LPG connections was 5 crore poor women. But, buoyed by the success, this target has been extended to 8 crore poor women

₹ 16,000 crores will be spent on electrifying 4 crore poor households

Targeting that every poor in this country will have a roof, 51 lakh houses and 37 lakh houses will be constructed in rural and urban areas respectively

HealthIn a huge move, making it the biggest government funded health programme in the world, 10 crore poor and vulnerable families will be eligible for a medical insurance cover of ₹ 5 lakhs per year.

To step up investment in research and related infrastructure in premier educational and health institutions, a big initiative named ‘Revitalising Infrastructure and Systems in Education by 2022’, will be launched with an investment of ₹ 1 lakh crore over the next four years.

The ‘Prime Minister’s Research Fellows’ Scheme will identify 1,000 best B. Tech students across the country and provide them facilities to do Ph.Ds. in IITs & IISc along with a handsome stipend.

InfrastructureCapital expenditure of Railways will be ₹ 1.49 lakh crores

600 major railways stations are being redeveloped

Mumbai will get an additional 150 Km of suburban rail at a cost of ₹ 40,000 crore and so too will Bangalore, an additional 160 Km at a cost of ₹ 17,000 crores

Currently, the Airports Authority of India has 124 airports. This will be increased five-fold to handle a billion trips

OthersTwo Defence Industrial Corridors will be set up

A new Defence Production Policy will be brought out to promote domestic production by the public sector, private sector and MSMEs.

A new scheme whereby every enterprise will have a unique ID

The disinvestment target this year will be ₹ 80,000 crores

Focus on agriculture and an unwavering commitment towards Make in India sums up the philosophy of this Government. With unbridled largesse directed towards the rural and agricultural household coupled with a barely concealed animosity towards imports jeopardising local manufacturing, the Government seems set on its path towards voting itself into power for a second term.

While the budget is filled with the regular hangers-on in the form of rural electrification, irrigation, roads, railways etc. there have been a few pleasant surprises too, at least as far as the intentions are concerned, in the form of health insurance for all and so on.

On the tax front, individual tax payers seemed to have been rewarded with little else other than empathy while corporate tax payers continue to be rewarded for their contribution to the economy in the form of lowered taxes. With the move to GST, the budget offers changes only to Customs while the fate of GST has been left to the wise men of the GST council.

And so, the wheels of the Government continue their roll holding out a hope here, handing out a threat there, all the while trundling towards a promised utopia.

PolicyThe Finance Minister does not mince words when he says ‘My Government is committed for the welfare of farmers’. This together with a focus on rural welfare and wealth thus set the tone for this year’s budget.

Given that this would be the last budget before the next elections, populism was a given. But, even in populism, it is worth reflecting whether it was a well-crafted form of populism or was it just mindless. On balance, one would think that this budget tilts towards the former, rather than the latter.

So let us get a dekko into the Government’s Policy measures.

FarmersThe Minimum Support Price across all crops will be 150% of cost of production

22,000 existing rural haats will be converted into Gramin Agricultural Markets

An Agri-Market Infrastructure Fund with a corpus of ₹ 2,000 crores will upgrade the infrastructure of these Gramin Agricultural Markets

Medicinal and aromatic plant cultivation and associated industries will get a support of ₹ 200 crores

The budget for food processing will be doubled to ₹ 1400 crores

₹ 500 crores will be set aside for Operation Green, on the lines of Operation Flood, to stabilise supplies of tomatoes, onions and potatoes

Bamboo will be promoted with an outlay of ₹ 1290 crores

5

The fisheries sector and the animal husbandry sector will have two new funds with a corpus of ₹ 10,000 crores.

Farm credit will be increased to ₹ 11 lakh crores

The Lower and Middle ClassThe initial target to provide free LPG connections was 5 crore poor women. But, buoyed by the success, this target has been extended to 8 crore poor women

₹ 16,000 crores will be spent on electrifying 4 crore poor households

Targeting that every poor in this country will have a roof, 51 lakh houses and 37 lakh houses will be constructed in rural and urban areas respectively

HealthIn a huge move, making it the biggest government funded health programme in the world, 10 crore poor and vulnerable families will be eligible for a medical insurance cover of ₹ 5 lakhs per year.

To step up investment in research and related infrastructure in premier educational and health institutions, a big initiative named ‘Revitalising Infrastructure and Systems in Education by 2022’, will be launched with an investment of ₹ 1 lakh crore over the next four years.

The ‘Prime Minister’s Research Fellows’ Scheme will identify 1,000 best B. Tech students across the country and provide them facilities to do Ph.Ds. in IITs & IISc along with a handsome stipend.

InfrastructureCapital expenditure of Railways will be ₹ 1.49 lakh crores

600 major railways stations are being redeveloped

Mumbai will get an additional 150 Km of suburban rail at a cost of ₹ 40,000 crore and so too will Bangalore, an additional 160 Km at a cost of ₹ 17,000 crores

Currently, the Airports Authority of India has 124 airports. This will be increased five-fold to handle a billion trips

OthersTwo Defence Industrial Corridors will be set up

A new Defence Production Policy will be brought out to promote domestic production by the public sector, private sector and MSMEs.

A new scheme whereby every enterprise will have a unique ID

The disinvestment target this year will be ₹ 80,000 crores

6

DIRECT TAX

However, the Hon’ble Delhi High Court in the case of The Chamber of Tax Consultants [TS-499-HC-2017 (DEL)] had struck down certain paragraphs of ICDS as they were ultra vires the Act.

In order to give legal sanctity to these paragraphs, the following amendments are proposed from 1 April 2017:

• Marked to market losses or other expected losses computed as per ICDS will only be allowed as deduction. • Any foreign exchange fluctuation arising from specified foreign currency transactions computed as per ICDS only shall

be treated as income or loss.• The profits from construction contract or a contract for providing service except for certain service contract shall be

determined on percentage completion method and that the contract revenue shall include retention money and contract cost shall not be reduced by incidental interest, dividend and capital gains.

• Valuation of inventory shall be made at lower of actual cost or net realizable value computed in the manner provided in ICDS.

• Valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the taxpayer to bring the goods or services to the place of its location and condition as on the date of valuation.

• Inventory being securities not listed or listed but not quoted on a recognised stock exchange, shall be valued at actual cost initially recognised in the manner provided in ICDS.

• Inventory being listed securities, shall be valued at lower of actual cost or net realisable value in the manner provided in ICDS and for this purpose the comparison of actual cost and net realisable value shall be done category-wise.

• Interest received by a taxpayer on compensation or on enhanced compensation, shall be deemed to be the income of the year in which it is received.

• The 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 realisation is achieved.

• Income in the form of subsidy or grant or cash incentive or duty drawback shall be deemed to be the income of the previous year in which it is received, if not charged to income tax for any earlier previous year.

Agricultural commodity derivatives

From 1 April 2018, trading of agricultural commodity derivatives, which is not chargeable to Commodity Transaction Tax, in a recognised association, will be treated as non-speculative transaction.

Presumptive income computation for heavy goods carriage

From 1 April 2018 onwards, presumptive income computation for heavy goods carriage taxpayer who owns not more than 10 goods carriages shall be computed based on ‘weight per ton’ basis. In the case of heavy goods vehicle the income would deemed to be an amount equal to ₹ 1,000 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 taxpayer, whichever is higher. The vehicles other than heavy goods vehicle will continue to be taxed as per the existing rates.

International Financial Services Centre

From 1 April 2018, in order to promote International Financial Services Centre (IFSC), it is proposed that transfer of foreign currency bond, global depository receipt, rupee denominated bond of Indian company or derivative by a non-resident will not attract capital gain tax if it is traded in foreign currency on a recognized stock exchange located in any International Financial Services Centre.

From 1 April 2018, in order to promote the development of world class financial infrastructure in India the alternate minimum tax will be levied at the rate of 9% on International Financial Service Centre, deriving income only in foreign currency.

Conversion of stock-in-trade into capital asset

At present, the conversion of capital asset into stock-in-trade attracts ‘capital gains’ tax, which is difference between Fair Market Value (FMV) on the date of conversion and cost of acquisition and any subsequent gain is charged to tax as ‘business income’, which is difference between sale consideration and FMV on the date of conversion.

In order to provide symmetrical treatment, from 1 April 2018, it is proposed to tax the conversion of stock-in-trade into capital asset as ‘business income’ on the date of conversion, which is difference between FMV on the date of conversion and cost of acquisition. Subsequent gain arising on sale of such converted capital asset will attract ‘capital gains’ tax, gain would be difference between sale consideration and FMV on the date of conversion. While computing the capital gain the holding period of such capital asset would be reckoned from the date of such conversion.

Stamp duty value vis-à-vis the sale consideration

At present, while calculating capital gain on transfer of immovable property in the hands of transferor, the stamp duty value is considered as deemed sale consideration if it is higher than actual sale consideration. From 1 April 2018, this rule will not be applicable if the stamp duty value does not exceed 105% of the actual sale consideration. The same is also made applicable in case of transfer of stock-in-trade being land or building or both.

7

Similarly, at present, person acquiring the immovable property, if the stamp duty value is higher than actual purchase consideration, the difference between the stamp duty value and the actual purchase consideration if it exceeds ₹ 50,000 is considered as ‘income from other sources’ in the hands of transferee. From 1 April 2018, this rule would not be applicable if the stamp duty value is less than 105% of the actual purchase consideration.

Exemption from tax on capital gain on investment in certain bonds

At present, any long term capital gain is exempt if the taxpayer has at any time within a period of six months from the date of such transfer, invested in NHAI or REC bond redeemable after 3 years.

From 1 April 2018, it is proposed to restrict such exemption only to long term capital gain from transfer of land or building or both and such investment in long term specified asset being NHAI or REC bond redeemable after 5 years.

Income from other sources

From 1 April 2018, transfer of capital asset by parent company to its 100% Indian subsidiary or by a 100% subsidiary to its Indian parent company without consideration will not be taxed as ‘income from other sources’

From 1 April 2018, compensation in connection with termination of employment or modification of terms and conditions of employment will be taxed as ‘income from other sources’ irrespective of capital or revenue in nature.

Companies under insolvency resolution

From 1 April 2017, the pre-condition of continuity of 51% of beneficial owners to avail the benefit of carry forward and set off of losses of a closely held company is proposed to be relaxed in case of companies whose insolvency resolution is approved under Insolvency and Bankruptcy Code, 2016.

In case of company under insolvency resolution, the aggregate of unabsorbed depreciation and loss brought forward will be available for reduction from book profit for computation of Minimum Alternate Tax (MAT) as against the lower of unabsorbed depreciation or loss brought forward.

In case of a company for which an application for corporate insolvency resolution is pending as per Insolvency and Bankruptcy Code 2016, it is proposed that tax returns must be verified by the insolvency professional.

Deductions effective 1 April 2018

The limit of deduction in respect of health insurance premium is proposed to be increased to ₹ 50,000 for senior citizens.

Deduction for health insurance paid in lump sum and having cover of more than one year will now be allowed on proportionate basis for the number of years for which health insurance cover is provided.

The deduction in respect of medical treatment for specified diseases is proposed to be increased to ₹ 100,000 in case of senior citizen.

The definition of ‘eligible business’ in the context of tax benefit for ‘start-up’ has been amended now to include innovation, development or improvement of products or processes or services or a scalable business model having high potential of employment generation or wealth creation.

Further, the benefit of profit-linked deduction would be available to eligible start-ups which are incorporated on or after 1 April 2016 but before 1 April 2021.

Furthermore, the deduction shall be available if the annual turnover does not exceed ₹ 25 crores for a period of 7 previous years from the date of incorporation.

Presently an additional deduction of 30% of employee cost is available to an eligible employer, who has employed new employees for a minimum period of 240 days during the year. However, for bringing the footwear industry on par with the apparel industry, it is proposed to extend the said minimum period of 150 days to footwear and leather industry.

Even if the condition of said minimum period is not satisfied in a financial year but the employee continues to be employed for minimum period in the subsequent year, the deduction would be available in the subsequent year.

At present, 100% profit linked deduction is available to profits of a co-operative society which provides assistance to its members engaged in primary agricultural activities. This will now be extended to Farm Producer Companies (FPC) whose gross total income includes any income from the marketing of agricultural produce grown by its members or purchase of agricultural supplies for its member or the processing of the agricultural produces of its members and having a total annual turnover of less than ₹ 100 crores from the financial year 2018-19 up to financial year 2023-24.

Senior citizen taxpayers can now avail enhanced deduction of up to ₹ 50,000 on interest from all deposits held with Banks, Cooperative society or Post office.

From 1 April 2017, benefit of all profit linked deductions would be available only if the return of income is furnished on or before the prescribed due date.

New regime for taxation of long term capital gains on sale of equity

Currently there is an exemption on long term capital gain on Security Transaction Tax (STT) suffered equity shares or a unit of equity oriented mutual fund or a unit of business trust.

Effective 1 April 2018, such STT suffered long term capital gain in excess of ₹ 100,000 will be taxed at 10% without the benefit of indexation. The eligibility conditions are:

a) In the case of equity shares, STT has been paid both on the purchase and sale. b) In the case of unit of an equity-oriented fund or a unit of a business trust, STT has been paid on sale.

The long-term capital gain accrued till 31 January 2018 has been grandfathered by providing that the cost of acquisition in case of asset acquired before 1 February 2018, shall be deemed to be higher of-

a) the actual cost of acquisition of such asset andb) the lower of-

i) The highest price quoted on stock exchange as on 31 January 2018; and

ii) The full value of consideration received or accruing as a result of the transfer of the capital asset.

Further, deductions for payments towards LIC, PPF etc. and rebate will not be allowed against such long-term capital gain.

Tax on distributed income to unit holders of equity oriented fund

On distribution of income by an equity oriented fund to its unit holders the fund house will have to pay 10% as tax on the distributed income.

Change in definition of equity oriented fund.

From 1 April 2018, the definition of equity oriented fund in various provisions has been changed to mean unit scheme 1964 of UTI, fund setup under mutual fund and:

• Where funds invest in other funds trading in a recognized stock exchange, then a minimum of 90% of the proceeds are invested in the other fund and such other fund further invests minimum 90% of its fund in equity shares listed on a recognized stock exchange;

• In any other case a minimum of 65% of the proceeds are invested in equity shares listed on a recognized stock exchange.

The percentage shall be computed based on the annual average of monthly averages of the opening and closing figures.

Tax on income of certain domestic companies

In order to remove genuine hardship of a well intended scheme, it is now clarified that the tax rate of 25% is only restricted to the income from business of manufacture or production.

Removal of lacuna

The last budget taxed both the self-declared and addition made by the assessing officer with regard to unexplained assets, cash credits etc. at the rate of 60%. No deduction was allowed against such self-declared income; however no such provision existed in case of addition made by the assessing officer. Now this lacuna is bridged from 1 April 2017.

Minimum Alternate Tax

Retrospectively from 1 April 2001, the minimum alternate tax would not be applicable to the foreign companies whose income is taxable on presumptive basis.

Dividend distribution tax on deemed dividend

From 1 April 2018, a loan or an advance given by a private company to its shareholders holding 10% or more will attract dividend distribution tax at the rate of 30%. However, as a matter of respite this will not be further grossed up unlike the dividend distribution tax in other cases.

Financial transaction tracking through Permanent Account Number

From 1 April 2018, in order to track the financial transactions in excess of ₹ 2,50,000 in case of non-individuals it is proposed that such persons will be required to obtain permanent account number including the persons competent to act on its behalf like managing director, partners, trustee etc.

Assessments

From financial year 2017-18, Centralized Processing Centre are barred from making any adjustment to the reported income of taxpayer for any mismatch between income appearing as per tax credit statement / TDS certificates and the tax returns filed by the tax payers.

With the approval of the parliament, a new team based assessment is to be introduced before 31 March 2020 as against the present system of assessment by jurisdictional tax officer, where by the interaction between the assessing officers and taxpayers will be minimized or completely eliminated.

Withholding tax

In case of new bonds to be issued by Government of India i.e. 7.75% Savings (Taxable) Bonds 2018 withholding tax will apply for amount in excess of ₹ 10,000.

From financial year 2018-19, for Senior citizens, interest income up to ₹ 50,000 is exempt from withholding of tax.

Moving on to the tax proposals in the budget, there appears to be a great reluctance on part of the Finance Minister to accommodate the individual tax payer. Indeed, as can be seen in the following paragraphs, the proposals appear to be more of a sleight of the hand rather than a serious attempt to tinker with the tax laws.

Deemed dividend

Companies with large accumulated profits have in the past amalgamated to reduce capital and have avoided the implication of deemed dividend. To curb such arrangements, from 1 April 2018, for the purpose of computation of deemed dividend in case of amalgamation, the accumulated profits, whether capitalized or not of amalgamating company as on date of amalgamation will be added to the accumulated profits, whether capitalized or not or loss as the case may be of the amalgamated company.

Business connection

Business Connection (BC) under domestic law is akin to ‘Dependent Agent Permanent Establishment’ (DAPE) contained in most tax treaties. Any person acting on behalf of a non-resident who concludes any contract would constitute a DAPE or BC of such a non-resident. To avoid this, an oft used route was to permit the resident to do all activities up to and excluding concluding the contract.

To overcome this, the OECD, under the BEPS Action Plan 7 amended the definition of Permanent Establishment by bringing in an anti-splitting rule. The Indian tax treaties are re-negotiated by including the changed definition in Article 12 of the Multilateral Instruments (MLI). So in order to align the definition of BC with the BEPS Action Plan 7, it is now proposed that from 1 April 2018, following would constitute BC:

• Person has an authority to conclude contract on behalf of the non-resident;• Person habitually concludes contract on behalf of the non-resident;• Plays the principal role in conclusion of contracts by the non-resident in its name or transfer of ownership of, or

granting right to use, property of the non-resident or for the provision of service by the non-resident.

In order to bring the taxation law in line with the changes in technology the BEPS Action Plan 1 addressed the tax challenges in a digital economy by suggesting various options to tax business entities and one among them was ‘significant economic presence’. The said option is proposed to be introduced in the Indian domestic law from 1 April 2018, by providing that significant economic presence of non-resident would constitute BC in India. Significant economic presence would mean:

• the transaction in India with regard to goods, services or property carried out by a non-resident including the provision of download of data or software provided quantum of such transactions exceeds the prescribed limit;

• systematic and continuous soliciting of business or engaging in interaction, through digital means in India, with prescribed number of users.

The above said transaction would constitute ‘significant economic presence’ irrespective of the fact that non-resident has a place of business in India or renders services in India.

Exemptions

From 1 April 2018, payments received by the non-resident or foreign company towards royalties or fees for technical services from National Technical Research Organisation (NTRO) will be exempt from payment of taxes in India.

Earlier the withdrawal from National Pension Scheme on closure or opting out of scheme was exempt to the extent of 40% of such sum withdrawn in case of employees. From 1 April 2018, for the sake of parity the said benefit is extended to all the taxpayers.

Universities, educational institutions, hospitals, trust etc. are exempt from tax provided they satisfy certain conditions, a critical one being application of at least 85% of funds towards key objectives. A key issue has been lack of restrictions on cash payments and no checks on compliance with the withholding tax provisions. From 1 April 2018, the following will not be considered towards such application:

• Cash expense in excess of ₹ 10,000• 30% of payments to resident payees on failure to withhold tax.

The same applies to the religious and charitable trust registered with the income tax authority.

Standard deduction on salary income

From 1 April 2018, a standard deduction of ₹ 40,000 or the actual amount of salary which ever is less will be allowed on salary income. This will be in lieu of transport allowance of ₹ 19,200 (except in the case of differently abled person) and reimbursement of medical expenses up to ₹ 15,000.

Certain receipts are taxed as business income

From 1 April 2018, compensation received for termination or the modification of the terms of any business contract will be taxable as ‘business income’.

Income computation and disclosure standards (ICDS)

Central Government notified ten ICDS with effect from financial year 2016-17 which are applicable to all taxpayers (other than an individual or a HUF who are not subject to tax audit) for the purposes of computation of income chargeable to tax under the head “Profits and gains of business or profession” or “Income from other sources”.

Appeals

From 1 April 2018, an appeal can be filed to the income tax tribunal, against an order passed by the Commissioner (Appeals) confirming penalty for furnishing incorrect information in reports or certificates by accountants, merchant bankers or registered valuers.

Penalty

From 1 April 2018, penalty for failure to furnish Statement of Financial Transaction (SFT) has been increased from ₹ 100 per day to ₹ 500 per day of delay.

Further, in case of default after receipt of notice for filing from tax authorities, ₹ 1,000 per day will be levied as against

₹ 500 per day.

In case of willful default in furnishing a return of income within its due date, taxpayer shall be punishable with prosecution and fine. One relaxation was provided to taxpayer in case where net tax payable by him on the total income determined on regular assessment does not exceed ₹ 3,000.

From 1 April 2018, all such relaxations have been withdrawn in case of companies.

Furnishing of report in respect of international group (CbCR)

In case of an International group qualifying the specified threshold to file CbCR, clarificatory amendments, retrospectively from 1 April 2017, are proposed in case of due date for filing the report:

• The time allowed for furnishing CbCR in case of parent entity or alternative reporting entity, resident in India is proposed to be extended to 12 months from the end of reporting accounting year.

• In the case of an Indian constituent of an international group, where the non-resident parent neither has any obligation to file CbCR in its country nor has it appointed any alternative reporting entity to file CbCR, then the CbCR needs to be filed in India within 12 months from the end of reporting accounting year.

• The time allowed for furnishing CbCR in case of alternative reporting entity which is non-resident, it is proposed to have due date specified by that country.

Agreement for exchange of reports entered into are also brought in within the definition of ‘Agreement’.

Reporting accounting year means the period for which the financial statements are to be considered for reporting in the CbCR.

























8










































Removal of lacuna








Assessments



Withholding tax




Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.


































9










































Removal of lacuna








Assessments



Withholding tax




Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.


































10










































Removal of lacuna








Assessments



Withholding tax




Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.



























































11

















Removal of lacuna








Assessments



Withholding tax




Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.



























































12

















Removal of lacuna








Assessments



Withholding tax




Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.











































































Removal of lacuna








Assessments



Withholding tax



13


Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.











































































Removal of lacuna








Assessments



Withholding tax



14


Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.











































































Removal of lacuna








Assessments



Withholding tax



15


Deemed dividend


Business connection









Exemptions












Appeals


Penalty



₹ 500 per day.










Direct tax collection chart

FINANCIAL YEAR

` in

'000

mill

ions

2009

-10

(A)

2010

-11

(A)

2011

-12

(A)

2013

-14

(A)

2018

-19

(B)

2017

-18

(B)

2016

-17

(A)

2015

-16

(A)

2014

-15

(A)

2012

-13

(A)

2,000

0

4,000

6,000

8,000

10000

12000

Corporate Income Tax Personal Income Tax

2,447

1,2252

2,987

1,391

3,228

1,645

3,563

1,965

3,947

2,378

4,289

2,583

4,532

2,803

4,849

3,412

5,637

4,335

6,210

5,180

16

Type of Assessee Range of Income Tax Liability

Personal Income Tax

Resident Individual who is of the age of 80 years or more

up to ` 500,000` 500,001- ` 1,000,000` 1,000,001- ` 5,000,000` 5,000,001- ` 10,000,000` 10,000,001 and above

Nil(Taxable income - ` 500,000)* 20.80%(Taxable income - ` 1,000,000)* 31.20% + ` 104,000(Taxable income - ` 5,000,000)* 34.32% + ` 1,487,200(Taxable income - ` 10,000,000)* 35.88% + ` 3,348,800

Resident Individual who is of the age of above 60 years and less than 80 years

up to ` 300,000` 300,001- ` 500,000` 500,001- ` 1,000,000` 1,000,001- ` 5,000,000` 5,000,001- ` 10,000,000` 10,000,001 and above

Nil(Taxable income - ` 300,000)* 5.20%(Taxable income - ` 500,000)* 20.80% + ` 10,400(Taxable income - ` 1,000,000)* 31.20% + ` 114,400(Taxable income - ` 5,000,000)* 34.32% + ` 1,498,640(Taxable income - ` 10,000,000)* 35.88% + ` 3,360,760

Other Individual, Hindu undivided family, Association of person & Body of Individuals

up to ` 250,000` 250,001- ` 500,000` 500,001- ` 1,000,000` 1,000,001- ` 5,000,000` 5,000,001- ` 10,000,000` 10,000,001 and above

Nil(Taxable income - ` 250,000)* 5.20%(Taxable income - ` 500,000)* 20.80% + ` 13,000(Taxable income - ` 1,000,000)* 31.20% + ` 117,000(Taxable income - ` 5,000,000)* 34.32% + ` 1,501,500(Taxable income - ` 1,000,000)* 35.88% + ` 3,363,750

CHART FOR RATES OF TAXES FOR THE FINANCIAL YEAR 2018-19

17

The above rates are inclusive of surcharge, health and education cess wherever applicable without considering the benefit of marginal relief (if any)

Firms/LLP Tax

Firms/LLP Tax ` 15 – ` 10,000,000 Above ` 10,000,000

31.20% on Taxable income34.944% on Taxable income

Corporate Income Tax

• Domestic company having total turnover/2016-17 not exceeding

` 250 crores

` 15 – ` 10,000,000` 10,000,000 - ` 100,000,000Above ` 100,000,000

26.00% on Taxable income27.82% on Taxable income29.12% on Taxable income

• Domestic company other than above ` 15 – ` 10,000,000` 10,000,000 - ` 100,000,000Above ` 100,000,000

31.20% on Taxable income 33.384% on Taxable income34.944% on Taxable income

• Foreign company ` 15 – ` 10,000,000` 10,000,000 - ` 100,000,000Above ` 100,000,000

41.60% on Taxable income42.432% on Taxable income43.68% on Taxable income


• Domestic company ` 25 – ` 10,000,000 ` 10,000,000 - ` 100,000,000 Above ` 100,000,000

• Foreign company ` 25 – ` 10,000,000 ` 10,000,000 - ` 100,000,000 Above ` 100,000,000

Alternate Minimum Tax

• Firm or co-operative society having adjusted total income exceeding ` 2,000,000 from business or profession and claiming deduction in respect of certain income or capital expenditure in case of

` 25 – ` 10,000,000 Above ` 10,000,000

• Every Individual, Hindu undivided family, Association of person & Body of Individuals having adjusted total income exceeding ` 2,000,000 from business or profession and claiming deduction in respect of certain income

business or claiming SEZ tax holiday.

` 25 – ` 5,000,000 ` 5,000,001- ` 10,000,000 ` 10,000,001 and above

Type of Assetssee Range of Income Tax Liability

18

PROPOSED WITHHOLDING TAX RATES FOR PAYMENTS TO RESIDENTS IN THE FINANCIAL YEAR 2018-2019UNDER INCOME TAX ACT, 1961

1Applicable to all types of assessee2These above provisions are applicable to all types of assessee except individuals or Hindu Undivided Family, whose total sales, gross receipts or turnover from the business or profession does not exceed the limits specified in section 44AB in the previous year.3These above provisions are applicable to individuals or Hindu Undivided Family, except those whose total sales, gross receipts or turnover from the business or profession does not exceed the limits specified in section 44AB in the previous year.

Section Nature of payment

Recipient is

Resident Individuals & HUF Resident Firm / LLP Resident Company

With PAN Without PAN With PAN Without PAN With PAN Without PAN

192 Salary 1 Individual tax rate Not applicable Not applicable

193 Interest on securities 10.00 20.00 10.00 20.00 10.00 20.00

194A Interest other than ‘interest on securities’2 10.00 20.00 10.00 20.00 10.00 20.00

194C Payments to contractors: 2

Contractors 1.00 20.00 2.00 20.00 2.00 20.00

Contractors in transport business(not owning more than 10 goods carriage)

Nil 20.00 Nil 20.00 Nil 20.00

194D Insurance commission 5.00 20.00 5.00 20.00 10.00 20.00

194H Commission and brokerage2 5.00 20.00 5.00 20.00 5.00 20.00

194I Rent:2

Plant / machinery / equipment 2.00 20.00 2.00 20.00 2.00 20.00

10.00 20.00 10.00 20.00 10.00 20.00

194J Fee for professional or technical services2 10.00 20.00 10.00 20.00 10.00 20.00

194J Operation of Call Centers 2.00 20.00 2.00 20.00 2.00 20.00

194IA Transfer of any immovable property other than agricultural land or statutory compulsory acquisition

1.00 20.00 1.00 20.00 1.00 20.00

194IBor part of month paid 3

5.00 20.00 5.00 20.00 5.00 20.00

All figures are in percentage

19

PROPOSED WITHHOLDING TAX RATES FOR PAYMENTS TO NON-RESIDENTS IN THE FINANCIAL YEAR 2018-2019UNDER INCOME TAX ACT, 1961

Section Nature of paymentRecipient is a non-resident (other than foreign company)

≤ ` 50 lakh (` 5 million) ` 50 lakh to 1 crore (` 5 to10 million) > ` 1 crore (` 10 million)

194LB Interest by infrastructure debt fund 5.20 5.72 5.98

194LC Interest by Indian company towards:

(a) Foreign currency loan taken on or after July 1, 2012 but before July 1, 2020 5.20 5.72 5.98

(b) Long Term bond issued on or after October 1, 2014 but before July 1, 2020 5.20 5.72 5.98

(c) Rupee denominated bond issued before July 1, 2020 5.20 5.72 5.98

195 Other Interest 20.80 22.88 23.92

Royalty 10.40 11.44 11.96

Fee for technical services 10.40 11.44 11.96

Any other income (other than capital gains) 31.20 34.32 35.88

Section Nature of paymentPerson to whom payment is made is a foreign company

≤ ` 1 crore (` 10 Million) ≤ ` 1 to 10 crore (` 10 to 100 Million) > ` 10 crore (` 100 Million)

194LB Interest by infrastructure debt fund 5.20 5.304 5.46

194LC Interest by Indian company towards:

(a) Foreign currency loan taken on or after July 1, 2012 but before July 1, 2020 5.20 5.304 5.46

(b) Long Term bond issued on or after October 1, 2014 but before July 1, 2020 5.20 5.304 5.46

(c) Rupee denominated bond issued before July 1, 2020 5.20 5.304 5.46

195 Other Interest 20.80 21.216 21.84

Royalty 10.40 10.608 10.92

Fee for technical services 10.40 10.608 10.92

Any other income (other than capital gains) 41.60 42.432 43.68

Notes:1) The above withholding tax rates are inclusive of surcharge, health and education cess, wherever applicable

All figures are in percentage

20

CUSTOMS

Amendments in Custom Tariff Act

Customs duties on mobile phones, parts of motor engines etc. has been increased.

Social Welfare Surcharge at 10% has been introduced. However, the rate will be 3% in case of petrol, diesel, silver and gold. Social Welfare Surcharge is not applicable on the IGST and Compensation Cess component. It is interesting to note that this exemption is only by way of notification thereby giving the Government adequate leeway to increase the collection of the surcharge merely by withdrawing the notification.

With the introduction of Social Welfare Surcharge, an exemption to Education Cess and Secondary and Higher Education Cess provided on all goods.

21

CustomsEffective date of import of goods

Taxable event under the Customs Act occurs when the goods are imported into India. India begins at the point of entry in territorial waters and extends all the way up to the point when the goods cease to be called ‘imported goods’. Thus, goods brought into India become ‘imported goods’ once they enter territorial waters of India, but they remain so until they are cleared for home consumption. To attract levy of tax, taxable event needs to be complete and it is not sufficient if it has merely commenced. Hence, taxable event under the Customs Act would occur when the goods are cleared for home consumption, that is to say, when they cease to be ‘imported goods’. And if bill of entry is filed before the date of ‘entry inwards’ of the ship/aircraft, then ‘arrival date’ or ‘entry inwards’ date would be considered for determination of taxable event . Thus, any goods warehoused on 1 February 2018 will be liable to any new levy that is introduced.

In-bond sales made at par with High Seas Sales for IGST valuation

In case of sale of goods from a bonded warehouse, IGST will now be computed on ‘transaction value’ of such sale. But be mindful of the fact that this IGST is payable under Section 3(7) of the Customs Tariff Act only once at the time of filing bill of entry for home consumption. Section 5 of IGST Act and Section 9 of CGST Act have no application here in terms of levy.

Limit of ‘Indian Customs Waters’ extended

It is proposed to extend the limit of ‘Indian Customs Waters’ into the sea up to the ‘exclusive economic zone’ from the existing ‘contiguous zone of India’. This amendment would have far reaching implications. Considering that ‘levy’ now stands attracted at 200 nautical miles, this is a very significant amendment. But the assessment of duty continues to be on the ‘date’ specified in section 15.

Cross-border job work

It is proposed to exempt import / re-import of goods into India in case of cross border job work transactions as the same are hit by Section 13(3) of IGST Act.

Electronic cash ledger

It is proposed to link electronic cash ledger maintained on GSTN portal under GST law with the Customs law to facilitate payment of customs duty and other sums. Suitable changes in this regard have been proposed under the Customs Act. This is a welcome measure that will avoid delays in payment of duty or amounts being transferred to CHA towards payment of duty. With this ECL, money can be transferred in advance and appropriated in respect of each demand.

Measures to reduce litigation

Economic Survey 2018 was critical of the Government as a poor litigant of tax-related matters. Arguably, as a best practice to reduce such frivolous litigations, it is now proposed to introduce a standard practice for tax officers to hold prior consultations with the assessees on the issues involved before issuing a show cause notice. Such consultations are welcome as they could reduce litigation since the option of payment of reduced penalty before issue of SCN has not seen much success.

Further, adjudicating officers are now bound by law to pass orders within 6 months/1 year, else the proceedings would be treated as void ab initio.

Power of the Commissioner (Appeals), to remand, that was withdrawn in 2001 is now proposed to be restored because of lack of resources to undertake quantification and verification of documents and records. On a related matter, it has been held that once a clear finding is recorded by the Appellate Tribunal and the matter sent back for for verification of records, the same does not amount to remand.

To facilitate speedy disposal of advance rulings and to align with GST law, it is proposed to reduce time limit from 6 months to 3 months for passing a ruling by AAR.

SCN for extended period covers normal period within its ambit

SCN that fails to satisfy a Court as to the requirements for invoking extended period of limitation not to fail in toto as held in UoI v. Naval Group. It continues ‘as if’ issued for the normal period of limitation. SCN that is not adjudicated within the time permitted or extended will abate in favour of Assessee. The benefit of such provision is that orders will forcibly be passed. Keeping SCN in abeyance (also called ‘on call book’) is not accommodated in cases where the same issue is pending before an appellate authority.

Issuance of Supplementary SCNs

Section 28 is proposed to be amended to provide for issuance of supplementary show cause notice in circumstances and in such manner as may be prescribed within the existing time period. It would be interesting to see the ‘circumstances’ when supplementary SCN would be issued, which is not the same as ‘statement of demand’ that has been followed in other laws for coverage of subsequent period but on identical issue.

CBEC renamed as CBIC

With the rollout of GST, it is proposed to change the name of the Central Board of Excise and Customs (CBEC) to the Central Board of Indirect Taxes and Customs (CBIC).





22


























23






















BangaloreNo.20, Uniworth Plaza,2nd Floor, Sankey Road,Bangalore - 560 020,Tel: +91-80-2334 7000;Fax: +91-80-2331 6852.

ChennaiNo. 2 (Old No. 23), 1st Floor,Ramakrishna Nagar,Second Main Road, R A Puram,Chennai - 600 028,Tel: +91-44-42075580 / 43084525;Fax: +91-44-42075681.

GurgaonUnit No: 220, Suncity Trade Tower,Sector 21, Near Krishna Chowk,Gurgaon - 122 001,Tel: +91-124-6694670 /79.

PuneB-202, MICCIA Trade Tower,International Convention Centre,Senapati Bapat Road, Pune - 411 016,Tel: +91-20-40032770;Fax: +91-20-40032771.

Ahmedabad# 805 A, Pinnacle Business Park,Corporate Road, Prahlad Nagar,Ahmedabad - 380 015,Tel: +91-79-40047072 / 73.

Hyderabad1st Floor, Block "A",Palace View Estate,No. 8-2-120, Road No.2,Banjara Hills,Hyderabad - 500 034,Tel: +91-40-66134401;Fax: +91-40-66134402.

This Precis of the Budget 2016 is prepared by JCSS Consulting for restricted circulation only. It should not be relied upon as a substitute for detailed advice or a basis for formulating business decision.

JCSS Consulting Private Limited

Date post:	04-Jun-2018
Category:	Documents
Upload:	lydan
View:	212 times
Download:	0 times

JCSS Budget book 2018 Web resolutionjcssglobal.com/budget/Budget 2018-2019.pdf · 1 The Lion begins...

Documents