CA Himanshu Goel

1. Rate of income tax in respect of income liable to tax for the assessment Year 2017-18

The slab rate and rates of taxes are not changed for the Assessment year 2017-18. These are same as for the AY 2016-17, Which are as follows:-

A.     Individual, HUF, AOP, BOI and Artificial  Juridical person.
Individual having age of 80 or moreUpto Rs. 5,00,000   NIL

Rs.5,00,000  to Rs. 10,00,000                                  20%

Above Rs.10,00,000                                                   30%

Individual having age of 60 or more but less than 80.Upto Rs. 3,00,000                                                      NIL

Rs.3,00,000  to Rs. 5,00,000                                   20%

Rs.5,00,001  to Rs. 10,00,000                                 20%

Above Rs.10,00,001                                                 30%

OthersUpto Rs. 2,50,000                                                      NIL

Rs.2,50,001 to Rs. 5,00,000                                    20%

Rs.5,00,001  to Rs. 10,00,000                                 20%

Above Rs.10,00,001                                                 30%

B.      Cooperative SocietiesThe tax rate is
C.      FirmTax rate is 30%
Surcharge on above

If total income of any Individual, HUF, Firm, AOP, BOI is exceeding 1 crore than the income tax liability is increased by 12%.

D.     CompanyIn case of domestic company the rate of income tax shall be 29% of the total income if the total turnover or gross receipt of the company, of the PY 2014-15 does not exceed 5 crore.

In other case its 30%.

New Section Inserted

In order to provide the relief to newly setup companies engaged solely in business of manufacturing or production of article or thing.

For this new Section 115BA is inserted.

As per this section income tax payable on total income of a person, being a domestic company, for any previous year for relevant assessment year beginning from 1.04.2017, shall at the option of such person, be computed @25% if the following conditions are satisfied:-

a)      The company has been setup and registered on or after 1.03.2016

b)     The company is engaged in business of manufacturing or production of any article or thing and

c)      The total of the company has been computed:

Without deduction of

Sec.10AA

Sec 32(1)(iia)

Sec 32AC

Sec33AB

Sec33ABA

Sec 35(ii),(iia), (iii),(2AA),(2AB)

Sec35AC

Sec 35AD

Sec 35CCC

Sec 35CCD

Under any provisions of chapter VI-A under heading of “Deductions in respect of certain incomes”.

The option by the person shall be exercised in prescribed manner on or before the due date specified under Sec139(1)

2. Tax Incentives for Start Ups:

With a view to provide fire to start ups and facilities their growth in the initial phase of their business. A new section 80IAC is introduced to provide 100% deduction on profit.

As per Sec 80IAC where the gross total income of an assessee being an eligible start up, includes any profits and gain derived from eligible business there shall be deduction od 100% of the profits and gains derived from such business.

Eligible Business:- means a business which involves innovation, development, deployment, or commercialization of new product, process or services driven by technology or intellectual property.

Eligible StartUp:- mean a company engaged in the eligible business which fulfills the following  conditions namely:-

  • It is incorporated in a period between 1.04.2016 to 31.03.2019.
  • The total turnover of the business doesn’t exceeds Rs. 25 crore in any previous year from 1.04.2016 to 31.03.2021.
  • It holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified in the official gazette by the Central Govt.

Further Section 54GB is amended, as per existing provisions there is exemption on cap gain on sale of residential unit if the capital gains are invested subscription of shares of company which qualifies to be MSEMED. Now this section is amended and if even if amount is invested in eligible startup business than also this deduction is available but   that individual and HUF must hold 50% shares of the new company.

Further this section is amended as earlier it provide exemption only on assets other than computer and computer software but from now onwards “New Assets” includes computer and computer software.

There is one more problem for these companies. I.e. is funding for the investment. To cope up this problem a new section 54EE is inserted.

As per Section 54EE, if any capital gain on long term assets, if the cap gain within 6 months is invested in units issued by the Govt. In case the amount invested is less than the capital gain than the exemption is only to extent the proportionate amount invested in the units to the capital gain. The amount invested must be on or after 1.04.2016 and maximum amount invest in financial in which asset sold and subsequent financial year can never exceeds Rs.50 lac. If the units are transferred at anytime within a period of three months than the capital gain exempted deemed to be income the year in which the asset is transferred.

Section As per current ProvisionsAs per amended provisons
Sec10AA–special provisions In respect of newly established units in special economic zonesProfit linked deduction for units in SEZ for the prfit derived from export of articles or things or services.No deduction shall be available too units commencing manufacturing or production of article or thing or start providing services on or after 1.04.2020.
35AC Expenditure on eligible projects or schemesDeduction for the expenditure incurred by way of payment of any sum to a public sector company or a local authority or to an approved association or institution etc. on certain eligible social development project or a scheme.No deduction shall be available with effect from 1.04.2017.
35CCD Expenditure on skill development projectWeighted deduction of 150% on any expenditure incurred on any notified skill development project by a  company.Deduction shall be restricted to 100% from  1.04.2020.
35(1)ii expenditure on scientific researchWheighted deduction from the business income to the extent of 175% of any sum paid to an approved scientific research association which has the object of undertaking the scientific research. Similar deduction is also available if sum is paid to approved associations having similar objective.For period 1.04.2017 to 31.03.2020  deduction is restricted to 150% and after that it is restricted to 100%.
35(1)iia Expenditure on scientific researchDeduction of 125 % is given if amount is paid to approved scientific research company for scientific research.From 1.04.2017  it is restricted to 100%.
35(1)iii Expenditure  on social and statistical researchDeduction of 125 % is given where money is  paid to approved research association and university for the research of social science and scientific research.From 1.04.2017  it is restricted to 100%.
35(2AA) Expenditure  on scientific research.Deduction of 200% of any sum paid national Laboratory or university or an  IIT or specified person for the purpose of approved scientific research programme.For period 1.04.2017 to 31.03.2020  deduction is restricted to 150% and after that it is restricted to 100%.
Sec 35(2AB) Expenditure on scientific researchDeduction of 200% of the expenditure incurred by a company engaged in business of manufacturing or production of an article  or things except some items appearing in the negative list specified on scientific research on approved in house research and development.For period 1.04.2017 to 31.03.2020  deduction is restricted to 150% and after that it is restricted to 100%.
Sec35AD Deduction in respect of specified business.In case of cold chain facility, wharehousing facility for storage of agriculture produce, an affordable housing project, production of fertilizer and hospital weighted deduction of 150% of capital expenditure is allowed.Deduction is restricted to 100%.
35CCC Expenditure on notified agriculture extention project.Weighted deduction of 150 % expenditure incurred on notified agriculture extension project.Deduction shall be restricted to 100% from  1.04.2017.

4. Under the existing provision of act  dividend income is exempt under section 10(34) and DDT is paid by the company  @15 % . As a result of which revenue is in loss as those who have higher dividend income having chargeable tax  rate  is 30% but DDT is paid only  @15%. So bring the equality a new section 115BBD is introduced. As per section  115BBD where total income of any person being Indviual, HUF or a Firm resident in India,  includes any income exceeding Rs.10 lac, by way of dividend declared by domestic company, the income payable shall be aggregate of :-

  • Tax on dividend income @10%
  • The amount of income tax with which assesse would have been chargeable had the total income if the assesse been reduced by the amount of income by way of dividends.

No Deduction is allowed by way of allowance or set off or carry forward of losses from the dividend income. And Dividend income here means the same as Sec 2(22) of income tax act specified except 2(22)(e).

5. In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the flow of unaccounted money in the trading system and to bring the high value money within tax net. To curb with this Section 206C is amended and from 1.06.2016 TCS should be collected on any sale of any good (other than goods and Bullions) and services @1% if sale value is higher than Rs.2Lac.

6. In order to encourage indigenous research & development activities and to make India a global R&D hub, the govt.has decided to put in place a concessional taxation regime for the income from patents. For this a new section115BBF is introduced and as per Section 115BBF Where the total income of a resident patentee includes any income by way of royalty in respect of patent developed and registered in India, the income tax payable shall be the aggregate of :-

  • Tax @10% on income by way of royalty in respect of patent.
  • The amount of income tax with which assesse under any provision of this act been reduced by the royalty income.

No deduction in respect of any expenditure and allowance shall be allowed against the royalty income.

“patentee” means the person, being the true and first inventor of the invention, whose name is entered on the patent register as the patentee, in accordance with the Patents Act, and includes every such person, being the true and first inventor of the invention, where more than one person is registered as patentee under that Act in respect of that patent;

  “royalty”, in respect of a patent, means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains” or consideration for sale of product manufactured with the use of patented process or the patented article for commercial use) for the—

(i) transfer of all or any rights (including the granting of a licence) in respect of a patent; or

(ii) imparting of any information concerning the working of, or the use of, a patent; or

(iii) use of any patent; or

(iv) rendering of any service  in connection with activities referred to in sub clause (i) to (iii).

7. There are some change in TDS which are as follows:-

 Increase in threshold limit of TDS on various payments:-
SectionHeadsExisting ThreshholdChanged Threshhold
192APayment to accumulated balance due to an employee.30,000/-50,000/-
194BBWinning of Horse Race.5,000/-10,000/-
194CPayments to contractors.Aggregate annual limit Rs.75,000/-Now increased to Rs.1,00,000/-
194LAPayments of compensation on acquisition of certain Immovable Property.2,00,000/-2,50,000/-
194DInsurance Commission20,000/-15,000/-
194GCommission on sale of lottery tickets1,000/-15,000/-
194HCommission or Brokerage5,000/-15,000/-
Change in rate of TDS
194DALife insurance Policy2%1%
194EENSS deposit20%10%
194DInsurance Commisison10%5%
194GSale of Lottery  Tickets10%5%
194HBrokerage10%5%
Section 206AA is amended so as to provide that the provisions of this section shall also not apply to a non-resident, not being a company, or to a foreign company, in respect of any other payment, other than interest on bonds, subject to such conditions as may be prescribed.

This amendment will take effect from 1st June, 2016.

8. The provision of sub-section 194-I of the Act, inter alia, provides for tax deduction at source (TDS) for payments in the nature of rent beyond a threshold limit. The existing provisions provide threshold of Rs. 1,80,000 per financial year for deduction of tax under this section. In spite of providing higher threshold for deduction tax under this section, there may be cases where the tax payable on recipient’s total income, including rental payments, will be nil. The existing provisions of section 197A of the Income-tax Act, inter alia provide that tax shall not be deducted, if the recipient of certain payments on which tax is deductible furnishes to the payer a self- declaration in prescribed Form.No. 15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. In order to reduce compliance burden in such cases, it is proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194-I also eligible for filing self-declaration in Form no 15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A.

This amendment will take effect from 1st June, 2016.

9. As per the existing provisions of clause(vii) of sub-section 2 of section 56 of the Act provide for chargeability of income from other sources in case any money, immovable property or other property with or without consideration in excess of Rs 50,000 is received by an assessee being an individual or an Hindu undivided family (HUF). The provisions also apply where shares of a companyare received as a consequence of demerger or amalgamation of a company. Such a transaction is not regarded as transfer where the recipient is a firm or a company.

With a view to bring uniformity in tax treatment, it is proposed to amend the Act so as to provide that any shares received by an individual or HUF as a consequence of demerger or amalgamation of a company shall not attract the provisions of clause (vii) of sub-section (2) of section 56.

These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.

10. In Section 44AD from 1.04.2017, the limit  for  the  presumptive income is increased from Rs.1 crore to Rs.2 crore.

Further in this section proviso to Section 44AD(2) allow the partnerships firms to  deduct salary and interest paid to partner, now this provision is removed and now onwards these expenses are deemed to be allowed.

Further  a new provision is added

Where an eligible assessee declares profit for any previous year in accordance with

the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of this section.

For Example :- An eligible  assessee claims to be taxed on presumptive basis under section 44AD for the assessment year 2017-18 and offers income of Rs.8 lac on the turnover of Rs.1 crore. For the assessment year 2018-19 and assessment year 2019-20 also he offers income of Rs.4 lac on turnover of Rs.1 crore. In this case since he has not offered income in accordance with the provision of section 44AD for five consecutive assessment years, after assessment  year 2017-18 he will not be eligible to claim the benefits of section 44AD for the next five assessment year i.e. from assessment year 2021-22 to 2025-26.

SectionExisting ProvisionAmended
43BAs per the existing provisions, sum payable by assessee by way of tax, cess, duty or fee, employer contribution to PF etc. is allowable as deduction of the previous year in which the liability to pay such sum was incurred, if the same is actually paid on or before the due date of furnishing of the return of income irrespective  of method of accounting followed by a  personNow, to ensure the prompt payment of dues to railways for use of the railway assets, Sec 43B is amended so as to expand the its scope to include payments made to Indian Railway for use of Railway assets within its ambit.
44ABAs per the existing provision, person carrying on a profession is required to  get his accounts audited if the total gross receipts in a previous year exceeds Rs.25 Lac.To reduce the compliance burden, the audit limit is extended to Rs.50 Lac.
44ADADoes not Exist·  In case of assesse, being a residentin India, who is engaged in profession reffered to Section 44(1), whose total gross receipts does not exceeds Rs. 50 Lac, a sum of 50% of total gross receipts or amount higher than that is deemed to be income Under the head PGBP.

·  Deduction allowable under Section 30 to 38 are deemed to be already given.

·  The written down value  of any assets is to be calculated as the depreciation has been provided for.

·  In case assesse claims profit lower than the amount specified, the assesse have to maintain books under mentioned U/S 44AA(1) and get them audited U/S44AB.

32ACAs per current provisions this section provides investment allowance of 15% on investment made  in new assets exceeding Rs.25 crore in a previous year is allowed with a condition that the acquisition and installation has to be done in same year.Acquisition and installation in one year is hard for the manufacturing concerns so this section is amended. And From now  onwards if year of acquisition and installation is different the allowance is available in the year of installation only.

But this is allowance  is only  upto 31.03.2017.

(Author is associated with S.S. Kothari Mehta & Co.)

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