An overview of Finance Bill, 2018 – Direct Taxes [as introduced in Lok Sabha on 01-02-2018] 

Brief Impact:

A. Individual, Hindu undivided family, Association of persons, Body of individuals (BOI), Artificial Juridical Person (AOP).

I. The rate of income tax is proposed to be same. Tax slab and rates remain unchanged.

Total income Proposed tax rate*

(AY 2019-20)

Existing tax rate*

(AY 18-19)

Up to INR 250,000** Nil Nil
INR 250,001 to INR 500,000 5% 5%
INR 500,001 to INR 1,000,000 20% 20%
Above INR 1,000,000 30% 30%

* Health & Education cess and surcharge as applicable.

** Basic exemption limit for resident individuals above 60 years but less than 80 years of age at any time during the FY is INR 300,000 and for resident individuals 80 years of age or more is INR 500,000 (unchanged).

II. Surcharge @ 10% is continued to be levied in cases where total income of an individual/HUF/AOP/BOI/Artificial Judicial Person exceeds Rs.50 lakh but do not exceed Rs. 1.00 crores. Surcharge of 15% wouldcontinue to be applicable where the total income of an individual/HUF/AOP/BOI exceeds Rs 1.00 Crore. [Subject to Marginal Relief]

III. Health and Education cess is proposed @ 4% of income tax plus surcharge. [EC and SHEC @ 3% shall proposed to be discontinue]

Rebate u/s 87A:

1. Maximum Rebate remained same u/s 87A – Rs. 2,500

2. If total Income does not exceed Rs. 3,50,000

Rebate u/s 87A is available only to Individual assessees, being resident in India.

B. Co-operative Societies

I. The rates of income-tax will continue to be the same as those specified for financial year 2017-18.

Total income Tax rate*
Up to Rs. 10,000 10%
Rs. 10,000 to Rs. 20,000 20%
Above Rs. 20,000 30%

II. Surcharge of 12% would continue to be applicable where the total income of co-operative society exceeds Rs 1.00 Crore. [Subject to Marginal Relief]

II. Health and Education cess is proposed @ 4% of income tax plus surcharge. [EC and SHEC @ 3% shall proposed to be discontinue]

C. Partnership Firms

I. The rates of income-tax will continue to be the same as those specified for financial year 2017-18 i.e. a partnership firm (including LLP) is taxable at 30%

II. Surcharge of 12% would continue to be applicable where the total income of firm exceeds Rs 1.00 Crore. [Subject to Marginal Relief]

III. Health and Education cess is proposed @ 4% of income tax plus surcharge. [EC and SHEC @ 3% shall proposed to be discontinue]

D. Local Authority

I. The rates of income-tax will continue to be the same as those specified for financial year 2017-18 i.e. a local authority is taxable at 30% [Health and Education cess is proposed @ 4% of income tax plus surcharge additionally].

II. Surcharge of 12% would continue to be applicable where the total income of Local Authority exceeds Rs. 1.00 Crore. [Subject to Marginal Relief]

III. Health and Education cess is proposed @ 4% of income tax plus surcharge. [EC and SHEC @ 3% shall proposed to be discontinue]

C. Domestic Company

I. Paragraph E of Part III to the First Schedule: In the case of domestic companies the rate of income-tax shall be proposed @ 25% (plus applicable surcharge and health & education cess) of the total income where the total turnover or gross receipts of previous year 2016-2017 does not exceed Rs. 250.00 crore and in all other cases the rate of income-tax shall be 30% (plus applicable surcharge and health & education cess) of the total income (Unchanged).

A. For a domestic company having total turnover/ gross receipts in the previous year (2016-17) not exceeding INR 250 Crores:

Particulars Taxable income < INR 1 crore INR 1 crore < taxable income < INR 10 crore Taxable income > INR 10 crore
Corporate tax 25% 25% 25%
Surcharge 7% 12%
Corporate tax + surcharge 25% 26.75% 28%
Health & Education cess* 4% 4% 4%
Effective tax rate 26% 27.82% 29.12%

* Proposed to be introduced w.e.f. A.Y. 2019-20.

B. For a domestic company having total turnover/ gross receipts in previous year 2016-17 exceeding INR 250 Crores:

Particulars Taxable income < INR 1 crore INR 1 crore < taxable income < INR 10 crore Taxable income > INR 10 crore
Corporate tax 30% 30% 30%
Surcharge 7% 12%
Corporate tax + surcharge 30% 32.10% 33.60%
Health & Education cess* 4% 4% 4%
Effective tax rate 31.20% 33.38% 34.94%

* Proposed to be introduced w.e.f. A.Y. 2019-20.

C. Foreign Company

I. The rates of income-tax will continue to be the same as those specified for financial year 2017-18 i.e. a foreign company is taxable at 40% [Health & Education cess and surcharge as applicable].

Particulars Taxable income < INR 10 million INR 10 million < taxable income < INR 100 million Taxable income > INR 100 million
Corporate tax 40% 40% 40%
Surcharge 2% 5%
Corporate tax + surcharge 40% 40.80% 42.00%
Health & Education cess* 4% 4% 4%
Effective tax rate 41.60% 42.43% 43.68%

* Proposed to be introduced w.e.f. A.Y. 2019-20.

Download Full Text of the PPT : Finance Bill, 2018 – Direct Taxes

Presented by: CA. Sanjay K. Agarwal
Assisted by: CA. Apoorva Bhardwaj & CA. Sonia Rani
Email: agarwal.s.ca@gmail.com

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