Highlights of Union Budget 2017-18

I.              DIRECT TAX

Personal Taxation – Tax Rates

Status of Individual                      Nil tax         5% tax            20% tax        30% tax

Resident/Non-resident (in lac)      2.50          2.50 – 5.00      5.00 – 10.00    >10.00

Resident – Sr. Citizen (in lac)          3.00         3.00 – 5.00      5.00 – 10.00    >10.00

(Age b/w 60 to 79)

Resident – Very Sr. Citizen (in lac) 5.00          Nil                  5.00 – 10.00    >10.00

(Age b/w 60 to 79)

(Surcharge @10% for taxable income b/w INR 5 million & INR 10 million and 15% for taxable income more than INR 10 million).

Corporate Tax Rate card

Types of Companies                     < INR 500 M                          > INR 500 M

  (Base - TO in 2015-16)                    (Including Surcharge & Cess)

Domestic Companies                    28.84%                                          34.61%

Foreign Companies                       43.26%                                          43.26%

LLPs                                                   34.61%                                          34.61%

Minimum Alternate Tax (MAT)       21.34%                                          21.34%

Dividend Distribution Tax (DDT)     20.36%                                          20.36%

(Companies engaged in manufacturing activity by satisfying prescribed conditions will continue to avail concessional tax rates of 28.84%).

Limit on Interest Deduction (Sec.94B)

• It is proposed to restrict deduction of interest or similar consideration paid or payable (for more than INR 10 million in any FY) by an entity to its Associated Enterprise (AE) to 30% of its earnings before interest tax depreciation & amortization.
•  This shall be applicable to an Indian Company or a permanent establishment of a Foreign Company in India, who pays interest or similar consideration as a borrower from a non-resident AE.
• This restriction shall not apply to a Company which is engaged in the business of Banking or Insurance in India. 
• Such disallowed interest expense (over and above 30% of EBITDA) is able to carry forward up to 8 years.

Transfer Pricing

New addition in transfer pricing regulations in the name of secondary adjustments introduced to remove the imbalance between cash account and actual profit of the taxpayer. Every taxpayer shall be required to exercise a secondary adjustment in his books of account in case a primary adjustment to the TP has been made by the taxpayer OR by the assessing officer as accepted by the tax payer.

The excess money available with the AE in result of the primary adjustment, if not repatriated to India within the prescribed time, shall be deemed to be an advance made by the taxpayer, requiring the provision of anticipated interest income, as prescribed by the law. This change will be effective from AY 2018-19 onwards.

But, the said secondary adjustment shall not apply in case:

•  The amount of primary adjustment does not exceed INR 10 million, and
• The primary adjustment is made in relation to any FY prior to 1^st Apr.2016.

Capital Gains

The period of holding to qualify as long term asset for Capital gain calculation reduced to 24 months in case of immovable properties.

Other tax proposals

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• Cash expenditure in excess of INR 10,000 to be disallowed if it is incurred for acquisition of capital assets.
•              No person shall receive payment or aggregate payments in cash for an amount of INR 300,000 or more from a person in a day, or in respect of a single transaction. Violation shall attract a penalty equal to the amount received in cash.   
•  If the consideration for transfer of shares of a Company is less than the fair market value (FMV), then the FMV shall be deemed to be the sale consideration.
•  The time limit for carry forward of MAT / AMT credit extended to 15 years from the existing limit of 10 years.
• Authority for Advance Ruling (AAR) for Income-tax, Central Excise, Customs Duty and Service Tax shall be merged.
• Assessment proceedings shall be completed within 18 months from the AY starting from 2018-19 and within 12 months from the AY 2019-20 onward.
• Revised tax return shall be filed within 12 months (as against 2 years at present) from the end of the FY starting from 2017-18.
• Refunds shall be processed even if the return is selected for audit until unless there is a restriction from the Commissioner of Income Tax.
• It is proposed to provide for grant of interest in case of refund of excess payment of TDS.
• Delay in tax return filings may attract a late fee.
• Receipt of any money, immovable property or specified movable property without consideration or with inadequate consideration by any person shall be taxable if its value exceeds INR 50.000.
• TDS has to be deducted at the rate of 5% by an individual or HUF, other than whose books of accounts are required to be audited, while making a rent payment in excess of INR 50,000 per month. The said TDS can be deducted and deposited once in a financial year thru a challan-cum-statement without any TAN and TDS return filing requirements.

   

     II.            INDIRECT TAX

Key Legislative changes

•   R&D cess shall be abolished w.e.f. 1^st Apr.2017.
•   Service Tax on Import of Technology shall be levied at full rate (15%) w.e.f.        1^st  Apr.2017.
•   BoE for imports need to be presented by end of the next working day from the  warehousing at Port.
• Payment of Customs duty need to be initiated on the same date of filing of BoE in case of Self-assessment.
• Permission shall be granted for Transfer of CENVAT credit on shifting, sale, merger etc. of the business within 3 months from the date of receipt of application by the jurisdictional Dy. / AC of Central Excise.

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