CA Neha Gupta

The Finance Minister, Sh. Arun Jaitley has finally presented the much awaited Union Budget 2017-2018 in Lok Sabha on Wednesday, 1st February, 2017. This is the fourth budget by the Narendra Modi government. It is a fairly balanced and mixed budget which will have a long term impact on the economy. The budget is for the poor and women focused with focus on agriculture and rural sectors.

Key highlights of the Finance Budget are presented as under:

  1. Reduction in Income tax rate from 10% to 5 % for individuals having income between Rs. 2.5Lakhs – Rs. 5Lakhs. This is clear cut reduction in 50% rate for the above slab. The below table will bring out clear cut impact of the change :

TABLE ON IMPACT OF CUT IN TAX RATE

INCOME SLAB

BEFORE

TAX RATE BEFORE (%) INCOME SLAB NOW TAX RATE NOW (%)
Upto Rs. 2,50,000 NIL Upto Rs. 3,00,000 NIL
Rs. 2,50,000 – Rs. 5,00,000 10 Rs. 3,00,000 – Rs. 5,00,000 5
Rs. 5,00,000 – Rs. 10,00,000 20 Rs. 5,00,000 – Rs. 10,00,000 20
Above  Rs. 10,00,000 30 Above Rs. 10,00,000 30

This means individuals having income below Rs. 3 Lakhs will not be required to pay any tax.

  1. In order to compensate the government loss in revenue due to reduction in tax rate, there will be an additional surcharge of 10% on individual income above Rs. 50 Lakhs to Rs. 1Crore. 15% surcharge on income above Rs. 1 Crore will remain continued.
  1. One page form has been designed as Income Tax Return for individuals filing return for the first time having taxable income upto Rs. 5 Lakhs other than business income. No scrutiny has been promised in the Budget for persons filing return for the first time upon fulfilling the prescribed conditions.
  1. For revision of return, time period has been reduced to twelve months from completion of financial year at par with the time period of filing of return.
  1. For scrutiny assessments, time period has been compressed from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and onwards.
  1. For Audit of business entities who opt for presumptive method of income tax, threshold limit has been increased from Rs. 1 Crore to Rs. 2 Crores.
  1. Regarding maintenance of books of accounts for individuals and HUF’s, threshold limit has been increased from present turnover of Rs. 10 Lakhs to Rs. 25 Lakhs or income from present Rs. 1.2 Lakhs to Rs. 2.5 Lakhs. It’s a slight relief for individuals and HUF’s.
  1. For professionals going for presumptive taxation with receipts upto Rs. 50 Lakhs, there is now an option to pay advance tax instalment in one go instead of earlier paying 4 instalments.
  1. TDS requirement has been relaxed for commission payable to individual insurance agents subject to the condition of submitting a self declaration form that their income falls below threshold limit.
  1. For small and medium tax payers which are covered under presumptive taxation scheme, there is a big relaxation in computing their deemed income @ 6% from present 8% of turnover if turnover is below Rs. 2 Crores which is by no cash means.
  1. MAT will continue and credit will be allowed to be carried forward for a period of 15 years instead of only 10 years at present.
  1. There is a big and rewarding relief to the small and medium sized enterprises which account for 96% of our industry. Income tax rate has been reduced from 30% to 25% with turnover upto Rs. 50 crores. It’s a boost to SME’s & MSME’s sector.
  1. Now, its turn for Real Estate Sector. For builders carrying constructed buildings as stock-in-trade, tax they are currently paying on notional income will apply after one year of the end of the year in which completion certificate has been received. This is a sign of giving them rest for 1 year from paying tax.
  1. With regard to Capital gain tax, holding period has been reduced from 3 years to 2 years for transfer of immovable property in the budget. It has also been proposed to shift the base year of indexation from 1 April 1981 to 1 April 2001 for all classes of assets including immovable property.
  1. In respect of carry forward of losses for start ups, the condition of continuous holding of voting rights of 51% has been relaxed in the budget subject to the condition that the holding of the original promoter continue. Not only that, the profit linked exemption available for 3 out of 5 years has been changed to 3 out of 7 years.

The Budget ended with GST Council’s strategies with regard to its preparations of IT System and efforts ongoing for its roll out by 1st July, 2017.  The nation is going for digitisation and many measures have been taken to curb black money in the budget itself. Now, it’s turn for the common man to stand and move towards a favourable and prosperous India.

Save the Nation. Curb Black Money.

(Author Details- CA Neha Gupta, B.Com, ACA, AIR (Final) 36, LNG & Associates, Chartered Accountants, Email: lng.cafirm@gmail.com)

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3 responses to “Union Budget 2017 – An Analysis”

  1. idiot says:

    Is it even likely that GST will be implemented by July 2017 ???

  2. Sunny says:

    CA Neha – Gst proposed roll out date is 1st july 2017 and it has been announced before todays budget. Pls get it correct.

  3. D E Tauro says:

    Capital gains on moveable assets? Pl. clarify moveable vs. immovable assets and holding period.

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