Refreshing the Amendments made through Finance Act 2018.

Certain major amendments were made in Income Tax provisions through Finance Act 2018.This write-up is just to highlight amendments in brief mainly applicable from A.Y 2019-20.

1. Income a.) Meaning of income extended to include the fair market value of inventory on conversion into capital asset referred to in clause (via) of section 28. Relevant section 2(24) sub clause (xiia).

b.) any compensation or other payment due to or received by any person in connection with the termination of his employment or the modification of the terms and conditions relating thereto as referred to in section 56(2)(xi)).

2. Application of income in respect of charitable institutions Provision of section 40(a)(ia) and section 4A(3), 40A(3A) made applicable to religious/charitable institutions.

Relevant section 11 explanation 3, and section 10 (23C) Thirteenth proviso.

3. Standard Deduction under the head Salary Income A standard deduction of up to Rs. 40,000/- allowed out of salary income. Deduction on account of Transport allowance and reimbursement of medical expenses withdrawn.

Relevant sections 16 (ia) and section 17 (2) (viii) clause (v) of proviso and section 10(14)(ii) rule 2 BB (2).

4. Business Income a.) Any compensation received or receivable whether revenue or capital in connection with the termination or modification of the terms of any contract relating to its business to be treated us business income.

Relevant section 28(ii) (e).

b.) Method of calculation of Business Income ammended Relevant amendments in sections 43CA, 43CB w.e.f. 01.04.2017.

c.) Presumptive Taxation Provisions for income of heavy goods vehicle amended to provide that the income would deemed to be an amount equal to Rs One thousand per ton of gross vehicle weight or unladen weight as the case may be per month or part of month during which the vehicle is owned by the assessee for each goods vehicle or the amount claimed to be actually earned by the assessee, whichever is higher. (for vehicles of more than 12mt. gross vehicle weight) For other vehicles the income will be Rs. 7500 per month.

d.) Gross vehicle Weight has been defined under the motor vehicle Act to mean in respect to any vehicle the total weight of the vehicle and load certified and registered by the registering authority as permissible for that vehicle.

e.) Unladen Weight means the weight of a vehicle or trailer including all equipments ordinarily used with the vehicle or trailer when working, but excluding the weight of a driver or attendant: and where alternative parts or bodies are used the unladen weight of the vehicle means the weight of the vehicle with the heaviest such alternative part or body.

5. Capital Gains a. Liberalization in Taxation of capital gains on transfer of immovable property. Third proviso that stamp duty value shall be deemed to be consideration for the purpose of section 48 only if it exceeds 105% of the declared consideration.

b. Section 54EC amended w.e.f. 01.04.2019 to provide.

i. Exemption of long term capital gain on investment in Capital Gain Bonds restricted to immovable property only. Section 54EC (1) amended.

ii. The holding period of capital gain bonds u/s 54EC increased to 5 years from 3 years for capital gain arising in F.Y 2017-18 and onwards (section 54EC).

c. Long Term capital Gain on transfer of equity shares and units of equity oriented find has been subjected to tax (Section 112A).

i. Exemption u/s 10(38) is withdrawn for transfer made after 01.04.2018.

ii. The rate of tax on such LTCG has been prescribed @10% in excess of Rs. 1,00,000/- subject to conditions of payment of STT on shares acquired after 01.10.2004.

iii. The method of calculation of cost of acquisition has been provided in newly inserted section 55(2)(ac)

iv. The new section 112A applies to all assesses i.e. corporate, non-corporate, resident and non-resident, it is not applicable to Foreign Institution Invertors (FII).

v. No indexation is allowed while calculating the capital gain on sale of equity share/units.

vi. Computation of cost of acquisition of capital asset acquired before 01.02.2018 will be higher of

a. Cost of acquisition of asset. and

b. The lower of

1. The Fair Market value of the asset and

2. The consideration received or accruing as a result of a transfer (Section55(2) (ac)

vii. Treatment of Bonus Shares.

a.) Bonus shares acquired before 31.01.2018. the cost of acquisitions will be FMV as on 31.01.2018.

b.) Bonus shares acquired after 31.01.2018. The cost of acquisition will be nil. so the full sale consideration (after 01.04.2018) will be taxable @10%.

viii. Deduction under chapter VI-A are not available inrespect of Capital Gain under section 112A.

ix. Rebate u/s 87A is also not available inrespect of Capital Gain u/s 87A.

x. TDS will be applicable to non-residents and will be governed by the provision of section 195.

6. Medical expenditure Medical expenditure for senior citizen u/s 80D is allowed to the extent provided in the section subject to the condition of mode payment through other than cash.
7. Deduction u/s 80DDB Deduction u/s 80DDB in respect of medical treatment of specified diseases is enhanced to Rs. 1,00,000/- for both senior citizen and very senior citizen.
8. Amendment to section 139A Amendment to section 139A now requires every person being a resident other than individual, which enter into a financial transaction of an amount aggregating to Two Lakh Fifty Thousand rupees or more in a financial year to obtain PAN.
9. Amendments in section 143 Amendments in section 143 provide for certain changes in the assessment procedure.
10. Section 145A Section 145A has been substituted retrospectively w.e.f A/Y 2017-18 to counter the judicial pronouncements on the issue of applicability of ICDS. Earlier Ten ICDS were notified which are applicable to assessees (other than an individual or a HUF who are not subjected to tax audit u/s 44AB) for the purposes of computation of income chargeable to income tax under the head profits and gains of business and profession or income from other sources.
11. Section 145B Section 145B has been inserted to provide.

a.) For taxing the interest received by an assessee on any compensation or on enhanced compensation as the case may be, in the income of the previous year in which it is received.

b.) Subsection (2) That any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realization is achieved.

c.) Subsection (3) The income referred to in sub-clause (xviii) of clause (24) of section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year.

12. Section 194A Section 194A has been amended to provide for enhancing the TDS limit on interest income from banks and post offices from Rs. 10,000/- to Rs.50,000/- in the case of senior citizens.
13. Section 271FA Section 271FA amended to enhance the limits of penalty for delay in reporting the obligation u/s 285BA from one hundred to five hundred and form five hundred to one thousand rupees, for each day of continuing default.

This is a brief write-up. It is not possible to discuss the amended provisions in detail. For further clarification please refer to the relevant provisions of Finance Act 2018.

(Author is President, Patiala Tax Bar Association and Vice President, Punjab Tax Bar Association)

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March 2021