Highlights of Union Budget 2017-2018

any individual or HUF who have land under the land pooling scheme notified under the provisions of Andhra Pradesh CRDA Act, 2014, capital gains arising from the following transfer shall not be chargeable to tax under the Act:

• Transfer of capital asset being land or building or both, under the land pooling scheme.
• Sale of Land Pooling Ownership Certificate by the said persons received in lieu of land transferred under the scheme.
• Sale of reconstituted plot or land by said persons within two years from the end of the financial year in which the possession of such plot or land was handed over to the said persons.

Further Clarification: When sale takes place after the expiry of two years from the end of the financial year, the cost of acquisition of such specified capital asset shall be deemed to be its stamp duty value as on the last day of the second financial year after the end of the financial year in which the possession of the said specified capital asset was handed over to the assessee.

Section 10(38)

Long term Capital Gain Tax Exemption under this section for income arising on transfer of equity share acquired or on after 1st day of October 2004 shall be available only if the acquisition of share has been subjected to levy of to Securities Transactions Tax, except shares acquired in terms of notification to be issued. (IPO, Right issue, ESOP, Bonus, QIP issues likely to be exempted)

• Any amount credited or paid, out of income referred to section 11 to any other trusts or institution registered u/s 12AA being contributions with a specific direction that they shall form part of the corpus of the trust or institution, shall not be treated as application of income.
• It is also proposed to insert a proviso in clause (23C) of section 10 so as to provide similar restriction regarding non-treating the contribution as application of income as aforesaid in respect of any amount credited or paid out of their income to any trusts or institution registered u/s 12AA towards their corpus.
• Section 12A is proposed to be amended to provide that where a registered trust or an institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration; fresh registration is required to be obtained within 30 days from date of such modification or adoption in prescribed form.

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 up to 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.

After one year, it shall be taxable on notional rental income basis.

Section 269ST has been inserted to provide that no person shall receive an amount of three lakh rupees or more,
in aggregate from a person in a day or in respect of a single transaction or in respect of transactions relating to
one event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use
of electronic clearing system through a bank account.

However the aforesaid limitation shall not be applicable for following transactions:

• Any receipt by Government, any banking company, post office savings bank or co-operative bank.
• Transactions of nature referred to in section 269SS;
• Such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify

Cost Inflation Index

The base year for the purpose of indexation based on cost inflation index has been shifted from April 1, 1981 to April 1, 2001. This implies that for the purpose of computing indexation benefit, the cost of acquisition of any property purchased before April 1, 2001 will be deemed to be higher of actual cost or the fair market value as on April 1, 2001.

• If any asset or capital asset being investment held by non-resident, directly or indirectly, in a Foreign Institutional Investor, as referred to in clause (a) of the Explanation to section 115AD, and registered as Category-I or Category II Foreign Portfolio Investor under the SEBI, then the income derived from such investment shall not be deemed to accrue or arise in India as per explanation 5A to section 9 and it shall be out of purview of capital gain.
• Any transfer, made outside India, of a capital asset being rupee denominated bond of an Indian company issued outside India, by a non-resident to another non-resident shall be exempted from tax (in terms of section 47(viiaa)).
• Any transfer by way of conversion of preference shares of a company into equity shares of that company, shall be exempted from tax (in terms of section 47(xb) ).
• Appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company held by non-resident either by way of subscription or by way of secondary transfer, the said appreciation of rupee shall be ignored for the purposes of computation of full value of consideration u/s 48.
• Where consideration for transfer of share of a company (other than quoted share) is less than the Fair Market Value (FMV) of such share determined in accordance with the prescribed manner, the FMV shall be deemed to be the full value of consideration u/s 50CA (newly inserted) for the purposes of computing income under the head “Capital gains”.
• This section shall not be applicable for transfer of quoted share.“Quoted Share” means the share quoted on any recognised stock exchange with regularity from time to time, where the quotation of such share is based on current transaction made in the ordinary course of business
• U/s 54EC, Investment in any bond redeemable after 3 years which has been notified by centeral government shall also be eligible for exemption up to Rs. 50 lacs.

In order to provide parity between an individual who is an employee and an individual who is self-employed, Section 80CCD has been amended to increase the upper limit of ten per cent of gross total income to twenty per cent in case of individual other than employee such deduction shall be limited to Rs. 1,00,000.

The existing provisions of section 80-IAC, inter alia, provide that an eligible start-up shall be allowed a deduction of an amount equal to one hundred per cent of the profits and gains derived from eligible business for three consecutive assessment years out of five years beginning from the year in which such eligible start-up is incorporated.

In view the fact that start-ups may take time to derive profit out of their business, it is proposed to provide that deduction under section 80-IAC can be claimed by an eligible start-up for any three consecutive assessment years out of seven years (earlier 5 years) beginning from the year in which such eligible start-up is incorporated.

Whereas a result of primary adjustment to the transfer price, there is an increase in the total income or reduction in the loss, as the case may be, of the assessee, the excess money which is available with its associated enterprise, if not repatriated to India within the time, shall be deemed to be an advance made by the assessee to such associated enterprise and the interest on such advance, shall be computed as the income of the assessee.
“Secondary adjustment” means an adjustment in the books of accounts of the assessee and its associated enterprise to reflect that the actual allocation of profits between the assessee and its associated enterprise is consistent with the transfer price determined as a result of primary adjustment, thereby removing the imbalance between cash account and actual profit of the assessee. Secondary adjustment may take the form of constructive dividends, constructive equity contributions, or constructive loans.
And secondary adjustment shall not be carried out if, the amount of primary adjustment made in the case of an assessee in any previous year does not exceed one crore rupees.

• Moreover, the benefit for non-deduction of TDS u/s 197A by filling Form 15G/15H has been extended to the persons earning income from insurance commission as prescribed u/s 194D.
• The rate of 10% TDS u/s 194J has been reduced to 2 % for the persons engaged in the business of operation of call center. Now TDS u/s 194J shall be deducted @ 2 % in case the payee is engaged only in the business of operation of call centre.
• Deduction Of Tax At Source If Payment Of House Rent Exceeds Rs. 50,000
  Section 194IB have been introduced providing that, TDS needs to be deducted by any individual or HUF not liable for Tax audit on the rent paid to any resident individual if the rent amount exceeds 50,000 per month or part of month @ 5% thereon.The person responsible for payment shall not be required to obtain TAN. However, Such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

It has been provided u/s 139 (4C) that, the following persons shall be required to file their income tax return mandatorily with effect from the 1st day of April, 2018:

• Investor Protection Fund referred to in clause (23EC) or clause (23ED) of section 10
• Core Settlement Guarantee Fund referred to in clause (23EE) of section 10
• Board or Authority referred to in clause (29A) of section 10.

All Companies are already mandated to file their income tax return every year whether they have taxable income or not.

A new Section 234F has been inserted, providing that a fee shall be leviable on late filing of income tax return in the manner as below:

• five thousand rupees, if the return is furnished on or before the 31st day of December of the assessment year;
• ten thousand rupees in any other case
• one thousand rupees, if the total income of the person does not exceed five lakh rupees

However the provisions of section 271F in respect of penalty for failure to furnish return of income shall not apply from AY 2018-19 and onwards.

The time limit for making an order of assessment, reassessment or re-computation under section 147, in respect of notices served u/s 148 on or after the 1st day of April 2019 shall be 12 months from the end of the FY in which notice u/s 148 is served. Time limit for making an order of fresh assessment in pursuance of an order passed or received in the FY 2019-20 and onwards u/s 254 or 263 or 264 shall be 12 months from the end of the FY in which order u/s 254 is received or order u/s 263 or 264is passed by the authority referred therein.

However, if the person proves that there was reasonable cause for the failure referred to in the said section, then penalty shall not be imposable.

• Goods and Services Tax on track as the GST Council has finalised its recommendations on almost all the issues based on consensus on the basis of 9 meetings.
• The final draft of the IGST, CGST and SGST bills will be considered by the GST Council in their meeting to be held on 18th February 2017.
• The preparation of IT system for GST is also on schedule. The extensive reach-out efforts to trade and industry for GST will start from 1st April 2017 to make them aware of the new taxation system.
• The government has preferred not to make any changes in current regime of Excise & Service Tax because the same is to be replaced by GST soon.

• Explanation-I(e) to sub-rule 3Dof Rule 6 of CENVAT Credit Rules, 2004 is being amended to exclude banks and financial institutions including NBFCs engaged in providing services by way of extending deposits, loans or advances from its ambit.
  The value of service of extending the deposits, loans or advance where consideration by way of interest or discount would be considered for purpose of Rule 6. The impact is that there would be credit reversal for interest/discount income in case of banking company and a financial institution including a non-banking financial company, who are engaged in providing services by way of extending deposits, loans or advances.
• New sub-rule 4 is being inserted in Rule 10 of CENVAT Credit Rules, to provide that approval of requests regarding transfer of CENVAT credit on shifting, sale, merger, etc. of the factory by the jurisdictional Dy./Assistant Commissioner of Central Excise, shall be allowed within 3 months from the date of receipt of application from the manufacturer or service provider. Further such time period could be extendable for 6 months by Principal Commissioner or Commissioner of CE if sufficient cause is shown and for reason which is recorded in writing.

• For the purpose of Advance ruling “Authority” for Customs/ Central Excise/ Service Tax shall mean the Authority for Advance Ruling as constituted under section 245-O of the Income-tax Act, 1961.
• The Member of the Indian Revenue Service (Customs and Central Excise), who is qualified to be a Member of the Board, shall be the revenue Member of the Authority for the purposes of Customs Act.
• The applications pending before Authority for Advance Rulings (Central Excise, Customs and Service Tax) shall be transferred to the Authority from the stage at which such application or proceeding stood as on the date of such assent of the President.
• Provisions relating to vacancies not to invalidate proceedings are being omitted from Customs/ Central Excise/ Service Tax.
• Application fee for seeking advance ruling under Central Excise, Customs and Service Tax to be increased to Rs. 10,000/- from Rs. 2,500/-.
• Time of limit for Authority of Central Excise, Customs and Service Tax to pronounce its ruling has been revised to 6 months instead of 90 days.