Features of Indian Finance Bill 2018
SALIENT FEATURES OF INDIAN UNION BUDGET 2018 ARE AS FOLLOWS:
1. No change in Tax Rate. All persons including individuals, HUF, Firms and Companies to pay same tax. However, Education cess is being increased from 3 to 4 % to be known as Education and Health cess.
EXPLANATION: No change in income tax, but due to change in education cess from 3-4% you have to pay more tax in terms of education cess.
EXAMPLE: Suppose Mr. A has a total income of rupees 500000 earlier Mr. A has to pay tax 10300 now Mr. A has to pay tax 10400 due to increase in rate of cess from 3-4%.
2. However for Domestic Companies having total turnover or gross receipts not exceeding Rs.250 crores in Financial year 2016-17 shall be liable to pay tax at 25% as against present ceiling of Rs.50 crore in Financial year 2015-16.
EXPLANATION: The only difference now is that the tax advantage of 25% tax is passed to companies having more than Rs.50 Crores but up to Rs.250 Crores.
3. Long term Capital gain exemption under section 10(38) in respect of listed STT paid shares being withdrawn.
EXPLANATION: Earlier u/s, 10(38) in case of equity shares or equity oriented mutual fund in which STT has been paid no LTCG Paid by now gain up to 31.01.2018 would be exempt and gain after 31.01.2018 would be taxable…
EXAMPLE: This would be understand by this example suppose Mr. A has sells shares of 30.03.2018 of rupees 18 and the purchase cost of shares is 5 rupees on 10.03.2004, and fair market value of shares on 31.01.2018 is 15… That means 10(38) I’d exempt up to gain on 31.01.2018 so ur 10 rs gain is exempt and gain after 31.01.2018 that is rupees 3 would be taxable @10% and any purchase and sells of shares after 31.01.2018 is taxable @10%.
4. However capital gain up to 31.1.2018 shall not be taxed as cost of acquisition will be taken as Fair Market Value as on 31.1.2018.
EXPLANATION: Refer Example of Point-3
5. Tax on STT paid long term capital Gain will be 10% under Section 112A. Further such tax will be liable for TDS.
6. Standard Deduction of Rs.40,000 for salaried employees. However benefit of transport allowance of Rs.19,200 and Medical Reimbursement of Rs.15,000 under Section 17(2) are being withdrawn. Thus net benefit to salaries class only Rs.5,800.
EXPLANATION: This point is already covered in Example I given above but no medical allowance deduction of Rs.15000 and conveyance allow Rs.1600 pm that is 19200 would not be allowed. So, the effective gain for salary employees would be 40000-15000-19200=Rs.5800.
7. Provision of Section 43CA, 50C and 56(2)(x) being amended to allow 5% of sale consideration in variation vis a vis stamp duty value. On account of location, disadvantage etc.
8. Provision of section 40(i)(a) and 40A(3) and 40A(3A)are being made applicable to Charitable Trust . Hence expenditure incurred without deduction of tax and in cash will not be eligible as application of income under section 10(23C) and section 11(1)(a).
9. Agriculture Commodity Derivate income /loss also not to be considered as speculative under section 43(5).
EXPLANATION: Needs no explanation as it is now it is considered as business income.
10. Income Computation and Disclosure Standards (ICDS) being given statutory backing in view of decision of Delhi High Court decision.
11. Marked to market loss computed as per ICDS to be allowed under section 36.
12. Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA.
13. Construction Contract income to be computed on percentage completion method as per ICDS.
14. Valuation of Inventory including Securities to be as per ICDS.
15. Interest on compensation, enhanced compensation. Claim or enhancement claim and subsidy, incentives to be taxed in the year of receipt only as per new Section 145B.
16. Conversion of stock in trade to capital asset to be charged as business income in the year of conversion on Fair Market value on the date of conversion.
EXPLANATION: Suppose, I have a gold chain as a stock of rupees 200000 on 1.10.2005. Now if I convert this stock in to capital assets on 31.01.2018 so the market value on this present date of gold chain for example on, 31.01.2018 would be 250000 so 50000 would be business income it doesn’t matter whether the jeweler actually sell gold chain or not.
17. 54EC benefit of investment in Bonds to be restricted to Capital gain on land and building only. Further period of holding being increased from 3 years to 5 years.
18. PAN to be obtained by all entities including HUF other than individuals in case aggregate of financial transaction in a year is Rs.2,50,000 or more. All directors, partners, members of such entities also to obtain PAN.
19. All companies irrespective of income to file return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact weather it has tax liability of Rs.3,000 or not.
20. Assessments to be E assessment under new section 143(3A).
21. No adjustment under section 143(1) while processing on account of mismatch with 26AS and 16A.
22. Deemed dividend to be taxed in the hands of the company itself as Dividend Distribution of tax @ 30%.
23. Penalty for non-filing financial return as required under section 285BA being increased to Rs.500 per day.
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