Important Amendments Applicable for Financial year 2017-18

It has been two month ending of Financial Year 2017-18, CA Firms and Tax Consultant has started filing of income tax return and Auditing of their clients. There is many amendment for FY 2017-18 related to Income Tax, I have summarized some important amendments.

1. Income tax Slab rate for FY 2017-18 (A. Y. 2018-19)

Normal Rates of tax (applicable to all Individuals who are less than 60 years of aqe):-

Resident Senior Citizen (having age of 60 years or more but less than 80 years)

Resident Super Senior Citizen (having age of 80 years or more)

2. Rebate under section 87A of Income Tax Act, 1961

Resident Individual whose Taxable Income does not exceed Rs. 3,50,000 (after deductions), is eligible for rebate of 100 % of Income-tax or Rs.2,500, whichever is lower. Rebate has been reduced from Rs.5000 to Rs.2500 from AY 2018-19.) In other words no tax if income up to 300000 provided income after deductions is below Rs.3, 50,000/- .

The return for the financial year 2017-18 has to be filed within a period of one year from the completion of financial year i.e for financial year ending 31/03/2018 the last date to file return is 31/03/2019.

3. Fees for late filing of the income tax return (Section 234F)

The due date of return filing is generally 31st July. If the return is filed up to 31st December of relevant Assessment Year, then late filing fees of Rs 5000 will be mandatorily levied and Rs 10000 will be levied if the return is filed after 31st December of the relevant Assessment Year.

The late fees is restricted to Rs.1000 for assesses having income below Rs.500000/- after deduction.

4. New limit for claiming maximum loss of House property against Other Income

Till financial year 2016-17, for let out property, the entire loss from the said property could be adjusted against Other Income (without any limit). But from financial year 2017-18 the set-off of losses from House property, whether self occupied or let out, in a year is restricted to Rs 2 Lakhs to be adjusted against any other income.

Balance loss can be carried forward for set off against House Property Income in future till next 8 years.

5. Change in period for considering Capital Gain as Long Term

Till financial year 2016-17, immovable property, being land and building or both were considered as Long Term Capital asset after holding it for more than 36 months.

Now from financial year 2017-18 immovable property, being land and building or both will be classified as Long term Capital Asset after holding it for more than 24 months.

Thus, Indexation benefit will be available after completion of 24 months.

6. Deduction for Donations made in Cash (Section 80G)

Till financial year 2016-17, deduction for cash donation was allowed up to Rs 10,000.

Now the limit for donations in cash has been reduced to Rs 2,000. Thus if donation made in cash for more than Rs 2000, no deduction will be allowed.

7. Exemption in Capital Gain if Invested in certain Bonds (Section 54EC)

The existing section 54EC allows exemptions up to Rs 50 lakhs in respect of long-term capital gains invested in bonds issued by NHAI or RECL only within a period of six months after the sale of long term capital asset.

Now, not only the investment made in NHAI and RECL will classify for exemption but also the investment in any notified bonds which are redeemable after three years shall be eligible for this exemption.

This amendment has widened the scope for investments of capital gain which has arisen from Long term Capital Asset.

8. Change in limit for Contribution to NPS (Section 80CCD)

The employee or other individuals shall be allowed a deduction for amount deposited in National Pension System trusts (NPS).

The deduction under section 80CCD (1) cannot exceed 10% of salary in case of an employee or 10% of gross total income in case of other individuals. For employees, additional deduction of 10% of salary is allowed with respect to employer contribution under section 80CCD (2). Thus, employees get overall deduction of up to 20% of the salary income.

In order to remove such disparity for non salaried assesses, from A.Y 2018-19, deduction u/s 80CCD (1) to non-salaried persons, has been increased to 20% of gross total income from the earlier limit of 10% of gross total income.

9. Income Tax Rate for Partnership firm

1) Rate of tax @ 30% of Total Income

2) Remuneration to partners maybe paid out of Total Income with maximum ceiling as follows, before calculating tax.

In case of Loss – Rs.1,50,000/‑

On first profit of Rs.3,00,000/-: Rs.150000/- or 90% of Book profit whichever is higher.

On the profit above Rs. 3 lac: @60%

3) Interest up to 12% on capital allowed

10. Income tax rate for Companies

Companies with turnover up to Rs.50 crore in FY 2015-16 will be required to pay 25% tax

Companies with turnover more than Rs.50 crore in FY 201516 will be required to pay 30% tax

(MAT rate is 18.5% of book profits of the company Period of carry forward of MAT Credit was allowed for up to 10 years. This has now been increased to 15 years in Finance Act, 2017).

11. Benefit for Real Estate Companies or House Developers

No notional rent to be taxed on house property inventory which is less than 12 months old, from the end of the year in which the property is completed. Therefore, if property is completed on 1 st July, 2017, then no notional rent is taxable for 12 months from end of FY in which property is completed.

End of FY ± 31st March, 2018. Therefore, 12 months from end of FY is 31st March, 2019

12. Tax Audit Limit

• Professionals If turnover exceeds Rs.50 Lakhs.
• Business Assesses If turnover exceeds Rs.1 Crore.

If profits are lesser than the presumptive taxation prescribed rates, tax audit will be required.

13. Presumptive Taxation

You can opt for presumptive scheme if turnover is up to Rs.2 Crore.

If all the receipts are through banking channels tax is to be paid of 6% of gross receipt else 8% is to be paid instead of 6%.

In case of professionals 8% should be replaced by 50%.

(No need to maintain books of accounts and no need to pay advance tax but has to pay 100% of his estimated tax before 15 March.)

The Partnership Firms were previously eligible to claim deduction of Partners Remuneration and Interest paid to partners out of the Deemed Profit declared under this section, however w.e.f. A.Y. 2017-18, this has been omitted. Where an Assessee takes the benefit of the presumptive taxation provisions, he must do the same for the next 5 Assessment Years also. If, in any of the 5 next AYs, the Assessee fails to use these provisions, he will be denied the benefit of these provisions for a period of 5 years, from the year he fails to use these provisions as mandated.

14. Tax on Capital Gain from Sale of Equities

Short Term Capital Gain on Sale of Equities & Equity Oriented Mutual Funds Taxed @ 15 % if traded through Recognized Stock Exchange in India. Long Term Capital Gain on Sale of Equities & Equity Oriented Mutual Funds will attract No tax ± If traded on a Recognized Stock Exchange in India.

15. Section 80D Mediclaim

For senior citizen deduction is available up to Rs. 30000/- and for others it is Rs.25000/-

16. Compulsory Quoting of PAN

Quoting of PAN will be compulsory in the following cases:

a. Sale or purchase by any person of goods or services of any nature other than immovable properties, shares, motor vehicle in excess of Rs 2 Lacs per transaction, irrespective of mode of payment.

b. Hotel/Restaurant bills in excess of Rs 50,000/-paid by cash (increased from Rs 25,000/-)

c. Sale or purchase of immovable property exceeding Rs 10 lacs (increased from Rs 5 Lacs)

d. Purchase or Sale of unlisted shares Rs 1 Lac (increased from Rs 50000/-)

17. Change in limit of Cash Payment for Expenses and Capital Expenditure

Till financial year 2016-17, the limit for any cash payment made to a single person in a single day against any expenses was Rs 20,000. This said limit was not applicable to capital expenditure.

Now, the limit for any cash payment against expenses made to a single person in the single day is Rs 10,000. Also, cash payment made against capital expenditure on asset for more than 10,000 will not be added in the cost of the asset hence no depreciation will be allowed accordingly.

18. TDS on rent exceeding  Rs 50,000/- per month or part of the month

Section 194-IB is inserted for Individuals and HUF who pay rent exceeding  Rs 50,000/- per month or part of the month

TDS at the rate of 5% is to be deducted on the total rent amount paid during tenancy period only in the last month of the financial year or last month of the tenancy, whichever is earlier.

Also, PAN of the landlord is required to be furnished while making the payment of said tax. If the PAN is not been furnished to tenant, then TDS at the rate of 20% will be deducted. Such higher TDS deducted cannot exceed the amount of rent paid in the last month.

Deductor is not required to file the TDS returns and also not required to obtain the TAX Deduction Number (TAN).