CA Devesh K. Shah
Finance minister Mr. Arun Jaitley has presented his budget before the Parliament. This has special significance in the back drop of Demonstration, UP-Punjab state elections, BEPS, GAAR and other significant amendments in Tax Treaties with Singapore Cyprus etc.
This article analyses few of the amendments proposed:
1. Set-off of loss from house property
Set-off loss from house property is restricted to Rs. 2 lac against ‘any other head of income’. Residual loss can be carried forward to subsequent years but restrictions of set off limit, in any assessment year is Rs. 2 lacs.
This will give set back to the property purchased from borrowed fund where interest cost is substantial, which was hiterto available for set off against income under other head of income also. It has been justified in Memorandum that such practice is in line with international best practice.
2. Deduction of Tax at Source from rent payment
It is proposed to insert new section 194 IB wef. June 1. 2017. Hitherto, TDS obligation u/s 194I was fastened only on those individuals and HUF, who were subjected to Tax Audit
In accordance with proposed new Section, Individual and HUFs (other than those covered under Sec 44AB of the Act) and responsible for making payments of rent exceeding Rs. 50,000/- a month or part month during the year, would be required to deduct TDS @ 5% of such income.
The comfort line being that such individual would not be required to obtain (TAN) Tax deduction account number.
3. Capital gains.
For the purpose of computation of capital gains, cost of acquisition of assets acquired before 1.4.2001 shall be allowed to be taken as fair market value as on April, 2001 and cost of improvement increased thereafter. This is applicable w.e.f AY 2018-19.
It is welcome move, however, at times mathematics give strange calculation to explain, at times indexed cost from 1.4.81 till 31.3.2001 could give higher indexed cost than the market value as getting replaced as on April 1, 2001.
4. Carry forward of Tax credit for MAT & AMT
Carry forward of tax credit determined u/s 115 JAA in respect of Minimum Alternate Tax (MAT) and u/s 115JD in respect of alternate minimum Tax (AMT) is allowed to be carried forward up to 15th Year.
The catch being, corporate Tax for SME is required but MAT rate is not reduced. Thus, there is likely to be higher MAT credits being available in some cases, which may be difficult to set-off.
It is also proposed that amount of Tax credit in respect of MAT/ AMT to the extent of credit that relates to difference between amount of foreign Tax credit (FTC) allowed against MAT / AMT and FTC allowable against normal IT computation, would not be allowed to be carried forward.
5. To give boost to digital Economy following amendments are proposed
5A. Disallowance of cash payment exceeding Rs. 10,000/-
It is proposed to disallow cash payment exceeding Rs. 10,000/- (earlier limit was Rs. 20,000/-)
5B. Digital receipt in case of small business.
Existing provisions of Sec 44AD provides for presumptive based income of 8% for specified business, where turnover/ receipt do not exceed Rs. 2 crore.
To promote digital transactions, it is proposed to amend Sec 44AD to reduce existing rate of deemed income from 8% to 6% in respect of payments received by account payee cheque or bank draft or bank clearing system.
5C. Cash transaction not to exceed Rs 3 lacs
It is proposed that no person would receive an amount in cash of Rs 3 lacs or more, in aggregate from a person in a day or in respect of single transaction or in respect of transaction relating to one event or occasion.
It is also proposed to levy penalty of amount equivalent of amount collected in cash, in the hands of recipient, in violation of above provision.
This may affect very severely to jewelers, builders, purchase of agricultural produce. Unless, some categories are specifically exempted by Government by Notification. One important point being ‘one event or one occasion’ is covered. Thus, for marriage function, if payment is made in parts also to e.g. Caterer, exceeding Rs 3 lacs, it would get covered by this provision.