Budget Excerpts 2018
Individual Slab rates
Individuals and HUF remains the same as FY 2017-18
| Present | Proposed | ||
| Income Range | Rate (%) | Income Range | Rate (%) |
| Upto 2,50,000* | Nil | Upto 2,50,000* | Nil |
| 2,50,000 to 5,00,000 | 5% | 2,50,000 to 5,00,000 | 5% |
| 5,00,000 to 10,00,000 | 20% | 5,00,000 to 10,00,000 | 20% |
| 10,00,000 and above** | 30% | 10,00,000 and above** | 30% |
No change in the in the slab rates of income tax for FY 2018-19.
However, “Education Cess on income-tax” and “Secondary and Higher Education Cess on income-tax” of 3% shall be discontinued.
New Cess “Health and Education Cess” is introduced levied at the rate of 4% of the income tax including surcharge (wherever applicable)
* Exemption limit for senior and super senior citizens remains at INR 3,00,000 and INR 5,00,000 respectively.
**Surcharge at 10% on income exceeding INR 50,00,000; remains at 15% on income exceeding INR 1,00,00,000.
Newly introduced: Standard deduction on salary income”.
It is proposed to allow a standard deduction of INR 40,000 from the Salary Income under section 16.
The present exemption in respect of Transport Allowance of INR 19,200 (except in case of differently abled persons) and reimbursement of medical expenses of INR 15,000 is proposed to be withdrawn.
Corporate Assessee
| Present | Proposed | ||
| Company | Rate (%) | Company | Rate (%) |
| Domestic* | Domestic | ||
| – SME/ New Enterprise** | 25% | – SME/ New Enterprise | 25%* |
| – Others | 30% | – Others | 30% |
| Foreign*** | 40% | Foreign | 40% |
| *Surcharge at 7% and 12% where income exceeds INR 1cr and INR 10cr respectively.
**Companies with turnover not exceeding INR 50cr in the immediately preceding ***Surcharge at 2% and 5% where income exceeds INR 1cr and INR 10cr respectively. |
Proposed amendment:
*Companies with turnover not exceeding INR 250cr in the immediately preceding No change in the Surcharge rates |
||
Long Term Capital Gains Tax
| Present Law – Exemption u/s 10(38) | Proposed Amendment – Section 112A Taxable @10% |
| Under the existing regime, long term capital gains (‘LTCG’) arising from transfer of long term capital assets, being equity shares of
a company or an unit of equity oriented fund or an unit of business trusts , However, transactions in such long term capital assets carried out on a recognized stock exchange are liable to securities transaction tax (STT). |
It is proposed to withdraw the exemption under section 10(38) of the Act and to introduce a new section 112A in the Act to provide that long term capital gains arising from transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed at 10% of such capital gains exceeding one lakh rupees. |
Analysis of the proposed amendment:
- LTCG arising on or before 31st March 2018 is exempt from income tax
- LTCG arising after 31st March 2018 are liable for tax @10% provided that such capital gains exceed INR 1 Lakhs.
- Cost of Acquisition of such shares/Mutual funds pertaining to gains arising after 31st January 2018 shall be higher of the following amounts:
- actual cost of acquisition of such asset
- fair market value of such asset as on 31st January 2018
- Let us take an example: If you bought a share for INR 100 and have held it for more than 12 months (to qualify for LTCG); and say the fair market value of the asset on 31st January 2018 is INR 120 and you sell it for INR 130 on 1st February 2018 then the cost of acquisition of this share would be INR 120. You would (for tax purposes) have realised LTCG of INR 130 minus INR 120 INR 10.
If you sell the share for INR 110 on 1st February 2018 then your cost of acquisition would be INR 110.
If you sell the share for INR 90 on 1st February 2018 then your cost of acquisition would be INR 100.
For shares or equity MF units bought after 31st January 2018, capital gain would be computed as = Selling price – actual cost of acquisition (without indexation).
Change in Deductions under Chapter VIA
Deductions available to Senior Citizens
| Present Law – Section 80D | Proposed Amendment |
| Deduction upto INR 30,000 shall be allowed to a Senior Citizen
in respect of payments towards annual premium on health insurance policy, or preventive health check-up |
It is proposed to enhance this limit of INR 30,000 to INR 50,000.However, In case of single premium health insurance policies having cover of more than one year, it is proposed that the deduction shallbe allowed on proportionate basis for the number of years for which health insurance cover is provided. |
| Present Law – Section 80DDB | Proposed Amendment |
| Deduction upto INR 60,000 (Senior Citizen)/ INR 80,000 (Super senior citizen) with regard to amount paid for medical treatment of specified diseases. | It is proposed to enhance this limit of INR 60,000 & 80,000 to INR 100,000. |
Present Law – Section 80TTA |
Proposed Amendment – Section 80TTB for Senior Citizens only |
| Deduction upto INR 10,000 is allowed under section 80TTA to an assessee in respect of interest income from savings account. | It is proposed to insert a new section 80TTB so as to allow a deduction upto INR 50,000 in respect of interest income from Fixed Deposits, Recurring deposits, Saving Account, post office deposits etc. held by Senior Citizens.
However, no deduction under section 80TTA shall be allowed to Senior Citizens over and above INR 50,000. |
Measures to promote start-ups
Present Law – Section 80IAC |
Proposed Amendment wef AY 2018-19 |
| Deduction under this section shall be available to an eligible start-up for three
consecutive assessment years out of seven years at the option of the assessee subject to following conditions:
|
It is proposed to make following changes in the taxation regime for the start-ups:—
I. The benefit would also be available to start ups incorporated on or after the 1st day of April 2019 but before the 1st day of April, 2021; II. The requirement of the turnover not exceeding Rs 25 Crore would apply to seven previous years commencing from the date of incorporation; III. The definition of eligible business has been expanded to provide that the benefit would be available if it is engaged in :
|
Presumptive income under section 44AE in case of goods carriage
Present Law – Section 44AE |
Proposed Amendment wef AY 2018-19 |
| Section 44AE – profits and gains shall be deemed to be an amount equal INR 7,500 per month or part of a month for each goods carriage or the amount claimed to be actually earned by the assessee whichever is higher. The current presumptive income scheme is applicable uniformly to all classes of goods carriages irrespective of their tonnage capacity. The only condition which needs to be fulfilled is that the assessee should not have owned more than 10 goods carriages at any time during the previous year. Accordingly, the transporters who owns (less than 10) large capacity/ size goods carriages are also availing the benefit of section 44AE. |
It is proposed to amend the section 44AE of the Act to provide that, in the case of heavy goods vehicle more than 12MT gross vehicle weight, the income would deemed to be an amount equal to INR 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 assessee, whichever is higher.
The vehicles other than heavy goods vehicle will continue to be taxed as per the existing rates. |
Other Consequential Amendments
♦ Every person specified therein and who has not been allotted a permanent account the number shall apply to the Assessing Officer for allotment of a Permanent Account Number (PAN), who enters into an into a financial transaction of an amount aggregating to INR 2,50,000 or more in a financial year.
♦ Deemed Dividend under Section 2(22)(e) proposed to be taxed in the hands of the company instead of shareholder at the rate of 30% as Dividend distribution tax
♦ It is proposed to insert a new Explanation to Section 11 of the Act to provide that for the purposes of determining the application of income of the charitable trust, the provisions of
Section 40(a)(ia) – Disallowance of business expenditure to the extent of 30% on which TDS
is not deducted
Section 40A(3)/3A – Disallowance of Business expenditure if payment exceeding INR 10,000
is made by any mode other than account payee cheque/draft/ECS
Shall be applicable for charitable organizations registered u/s 12
♦ Section 276CC of the Act provides that if a person wilfully fails to furnish in due time the return of income, he shall be punishable with imprisonment and fine if the tax payable by him on the total income determined on regular assessment as reduced by the advance tax and TDS, if any paid, exceeds INR 3,000. The limit of INR 3,000 shall not apply in case of companies.
♦ Any compensation received or receivable, whether revenue or capital, in connection with the termination or the modification of the terms and conditions of any contract (including employment contract) relating to its business shall be taxable as business income.
♦ It is proposed to amend the provisions of clause (5) of section 43 to provide that a transaction in respect of trading of agricultural commodity derivatives, which is not chargeable to Commodity Transaction Tax (‘CTT’), in a registered stock exchange or registered association, will be treated as non-speculative transaction.
♦ At present, under section 80-JJAA of the Act, a deduction of 30% is allowed in addition to normal deduction of 100% in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year. However, the minimum period of employment is relaxed to 150 days in the case of apparel industry, and footwear and leather industry.
♦ No adjustment under section 143(1) while processing on account of mismatch with 26AS and 16A.
♦ Under the amended provisions of the section 10(12A) of the Act, an employee contributing to the NPS is allowed an exemption in respect of 40% of the total amount payable to him on closure of his account or on his opting out is available to non-employee subscribers also.
♦ No adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration on transfer of immovable property both for the buyer as well as seller of the property.
♦ Conversion of inventory into capital asset shall be charged to tax as business income
♦ It is proposed to amend Section 54EC of the Act wherein the investment in the Bonds could only be made on transfer of a long-term capital asset being Land and Building only and the Bond shall be redeemable after five years which is issued on or after 1st day of April, 2018.
♦ Income Computation and Disclosure Standards (ICDS) being given statutory backing in view of decision of Delhi High Court decision. Marked to market loss computed as per ICDS to be allowed under section 36. Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA. Construction Contract income to be computed on percentage completion method as per ICDS. Valuation of Inventory including Securities to be as per ICDS.
♦ If a person fails to furnish statement of financial transaction within the prescribed time, Penalty u/s Section 271FA has been enhanced from INR 100 to INR 500 per day and from INR 500 to INR 1,000 for every day of default.
♦ It is proposed that the Government will contribute 12% of the wages of the new employees in the Employee Provident Fund (‘EPF’) for all the sectors for the next three years.
Amendments Proposed in the Indirect Tax Regime
Excise duties to a large extent and service tax have been subsumed in GST, along with corresponding duties on imports. Changes in Customs and Central Excise law and rates of duty have been proposed through the Finance Bill, 2018. To prescribe effective rates of duty following notifications are being issued:
| CUSTOMS | Notification Nos. | Date |
| Tariff | 6/2018-Customs to No.23/2018-Customs | 2nd February, 2018 |
| CENTRAL EXCISE | ||
| Tariff | 1/2018-CE to No.13/2018-CE | 2nd February, 2018 |
♦ Increase in customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%.
♦ Reduction of customs duty on raw cashew from 5% to 2.5%.
♦ Abolition of Education Cess and Secondary and Higher Education Cess on imported goods, and in its place a new surcharge viz. ‘Social Welfare Surcharge’ is levied at the rate of 10% of the aggregate duties of Customs, on imported goods. Goods which were hitherto exempt from Education Cesses on imported goods will, however, be exempt from this Surcharge.
Important changes in respect of Customs and Central Excise duties rates and legislative changes are contained in the five Annexures appended to the budget:
1) Annex I contains details of Chapter wise changes in Basic Customs Duty, Social Welfare Surcharge
2) Annex II contains details of Chapter wise changes relating to Central Excise Duty and Road and Infrastructure Cess
3) Annex III contains details of amendments proposed in the Customs Act, 1962:
4) Annex IV contains details of other amendments proposed in the Customs Tariff Act, 1975; and
5) Annex V Miscellaneous provisions in the Finance Bill, 2018.
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