UNION BUDGET 2017-18
                                           DIRECT TAX PROPOSALS
BUSINESS TAXATION

   The threshold limit for audit of business entities who opt for presumptive income scheme proposed to be
   increased from Rs. 1 crore to Rs. 2 crore. This is a clarificatory amendment.
   The threshold limit for maintenance of books for individuals and HUF proposed to be increased from
   turnover of Rs. 10 lakhs to Rs. 25 lakhs or income from Rs. 1.2 lakhs to Rs. 2.5 lakhs.
   The scope of domestic transfer pricing to be restricted to cases where atleast one of the entities involved in
   related party transaction enjoys specified profit-linked deduction..
   In order to promote the development of affordable housing sector, section 80-IBA proposed to be amended
   to restrict carpet area to 30 and 60 sq.mtr. in the place of restriction of built up area to 30 and 60 sq.mtr. Also
   the 30 sq.mtr. limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the
   country including in the peripheral areas of metros, limit of 60 sq.mtr. will apply. In order to be eligible, the
   projectcan now be completed in 5 years after commencement (in the place of 3 years).
   Considering the business exigencies in case of real estate developers, section 23is proposed to be
   amended to provide that where the house property consisting of any building and land appurtenant thereto is
   held as stock-in-trade and the property or any part of the property is not let during the whole or any part of
   the previous year, the annual value of such property or part of the property, for the period upto one year from
   the end of the financial year in which the certificate of completion of construction of the property is obtained
   from the competent authority, shall be taken to be nil.
   The time period for revising a tax return is being reduced to 12 months from completion of financial year, at
   par with the time period for filing of return. The time for completion of scrutiny assessments is also proposed
   to be compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12
   months for Assessment Year 2019-20 and thereafter.

CORPORATE TAXATION

   To give effect to the announcement made bythe Finance Minister, in Union Budget 2015-16 that the
   corporate income tax rate would be reduced to 25% gradually and in order to make Medium and Small
   Enterprises more viable and to encourage firms to migrate to company format, the corporate tax rate is
   proposed to reduce to 25% from A.Y. 2018-19 for Medium and Small Enterprises companies with annual
   turnover uptoRs.50 crore.
   The period for carry forward of MAT credit proposed to be increased from 10 years to 15 years. Similar
   amendment is proposed in section 115JD to allow carry forward of Alternate Minimum Tax (AMT) to 15
   years.
   Provisions relating to computation of book profit for the purpose of levy of minimum alternate tax (MAT) for
   Ind-AS compliant companies introduced.
CAPITAL GAIN TAXATION
 With a view to promote the real-estate sector and to make it more attractive for investment, the period of
 holding for considering gain from immovable property, being land or building or both to be long term is
 proposed to be reduced from 3 years to 2 years.

    The base year for indexation proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets
    including immovable property. The change in base year will significantly lessen the capital gain tax liability
    while encouraging the mobility of assets.

    Presently, investment in bond issued by the National Highways Authority of India or by the Rural
    Electrification    Corporation    Limited    is        eligible   for     exemption   under   section   54EC.
    Inordertowidenthescopeofthesectionforsectorswhichmayraisefundbyissueofbondseligibleforexemp
    tion, the said section proposed to be amended so as to provide that investment in any bond
    redeemable after three years which has been notified by the Central Government in this behalf shall also
    be eligible for exemption.

TAX PROPOSALS TO REDUCE CASH TRANSACTIONS AND PROMOTE DIGITAL ECONOMY
    No deduction to beallowed under section 80G inrespectofdonation by any mode other than cash, if such
    amount of donation exceeds Rs. 2,000. Thepresent limit is Rs.10,000.

    The threshold limit under section 40A(3) for allowability of revenue expenditure incurred in cash is
    proposed to be reduced from Rs. 20,000 to Rs. 10,000.

    Currently, thereisnoprovisiontodisallowthecapitalexpenditureincurredincash. In order to discourage
    cash transactions even for capital expenditure, limit of Rs. 10,000 is proposed. Accordingly, capital
    expenditure incurred in cash shall be ignored for the purposes of determination of actual cost under
    section 43, if such amount of expenditure exceeds Rs. 10,000. Further, no deduction would be
    allowable under section 35AD, in respect of such capital expenditure incurred in cash for an amount
    exceeding Rs. 10,000.

    To promote digital transactions and to encourage small unorganized business to accept digital
    payments, section 44AD proposed to be amended to reduce the existing presumptive taxation rate of
    8%          to          6%,          inrespectoftheamountofsuchtotalturnoverorgrossreceiptsreceivedby
    anaccountpayeechequeoraccountpayeebankdraft
    oruseofelectronicclearingsystemthroughabankaccountduringthepreviousyearorbeforetheduedatespecifi
    edinsub-section of section 139 in respect of that previous year. However, the existing rate of deemed
    profit of 8% referred to in section 44AD of the Act, shall continue to apply in respect of total turnover or
    gross receipts received in any other mode. This amendment is proposed to be effective from A.Y.
    2017-18.

    Section 269ST to be inserted, to provide that no person shall receive an amount of Rs. 3 lakh ormore,
    in aggregate from a person in aday; in respect of a single transaction;or in respect of transactions
    relating      to        one        event          or                    occasion      from     a        person,
    otherwisethanbyanaccountpayeechequeoraccountpayeebankdraftoruseofelectronicclearingsystemthro
    ughabank account. Simultaneously, new section 271DA has also proposed to levy penalty of
    sumequaltotheamountofsuch          receipt     on     a    person      who      receives     such     sum      in
    contraventionoftheprovisionsoftheproposedsection269ST.
PERSONAL TAXATION

    The existing rate of income tax applicable on income between Rs. 2.5 lacs to Rs. 5 lacs is proposed to be
    reduced from 10% to 5% in case of individuals/HUFs or AOPs or BOIs.
    The rebate of Rs. 5,000 currently available under section 87A in case of an individual resident in India
    whose total income does not exceed Rs. 5,00,000, is proposed to be reduced to Rs. 2,500, where the total
    income does not exceed Rs. 3,50,000 from A.Y. 2018-19.
    Surcharge @ 10% of tax payable is proposed to be levied on individuals/HUFs or AOPs or BOIs whose total
    income exceedsRs. 50 lakhs but does not exceedsRs. 1 crore. Thereafter, surcharge @15% would continue
    to be applicable on total income exceeding Rs. 1 crore.

TAX DEDUCTION AT SOURCE
 In order to widen the scope of tax deduction at source, new section 194-IB, proposed to be inserted to
    provide for tax deduction at source @ 5% by an Individuals or a HUF (other than those covered under
    44AB), while making payment of rent to a resident of an amount exceeding Rs 50,000 per month or
    part of month. To reduce compliance burden, the deductor shall not be required to obtain TAN or file
    any separate TDS return for this purpose
    In order to promote ease of doing business, section 194J proposed to be amended to provide for
    lower the rate of deduction of tax from 10 % to 2% in case of payments made or credited to a person
    engaged only in the business of operation of call centre.
    A concessional with-holding rate of 5% is being charged on interest earned by foreign entities in external
    commercial borrowings or in bonds and Government securities. This concession is available on
    borrowings made, under a loan agreement at any time on or after 1st July, 2012, but before 1st July,
    2017; or by way of any long-term bond including long-term infrastructure bond on or after 1st October,
    2014 but before 1st July, 2017, respectively. The Concessional rate of 5% proposed to be extended in
    respect of borrowings made before 1st July, 2020. This benefit is also proposed to be extended to
    Rupee Denominated (Masala) Bonds.

PENAL PROVISIONS

    For improving tax compliance, new section 234F is proposed to be inserted to provide for levy of fees for
    late filing of return after the due date. Rs. 5,000 would be levied for return filed after the due date but on or
    before the 31st day of December of the assessment year and Rs 10,000, in any other case. However,
    where the total income does not exceed Rs. 5 lakh, the fee amount shall not exceed Rs. 1,000.
    New section 271J proposed to be inserted to provide that penalty of Rs.10,000 would be levied, if an
    accountant or a merchant banker or a registered valuer furnishes incorrect information in a report or
    certificate under any provisions of the Act or the rules made thereunder.