direct tax proposals impact analysis of union budget 2017...

IMPACT ANALYSIS OF UNION BUDGET 2017-18

Kolkata, Bengaluru, Chennai, Mumbai, Gurgaon & [email protected]

Direct Tax Proposals

mailto:[email protected]

UNION BUDGET---------------------------

2017-18

Particulars Slide

State of the Economy 3-7

Budget Financials 8

Uniqueness, Emphasis & Growth Drivers 9-11

Direct Tax Proposals 12-40

Indirect Tax Proposals 41-44

Sector Impact – Real Estate, Power, Banking & Financial and Education 45-49

Contents

DISCLAIMER:The information contained in this communication is intended solely for the use of the individual or entity to whom it is addressed andothers authorized to receive it. If you are an un-intended recipient, please notify us immediately by responding to this email and thendelete it from your system. Any action based on content in this communication shall be at the sole risk, responsibility and liability of theindividual taking such action. These updates shall not under any circumstance be construed as any kind of professional advice or opinionand we expressly disclaim any and all liability for any harm, loss or damage, including without limitation, indirect, consequential, special,incidental or punitive damages resulting from or caused due to your reliance and actions/inactions on the basis of this communication.

UNION BUDGET---------------------------

2017-18State of the Economy

Summary

• The Economic Survey for 2016-17, released on Tuesday (31st Jan, 2017) projects the GDP growth in the range of 6.75% to 7.50% in thenext fiscal year 2017-18 in the post-demonetisation year.

• The survey shows growth rate of the industrial sector estimated moderate to 5.20% in 2016-17 from 7.40% in the last fiscal.

• On account of better monsoon rains, growth in the agricultural sector is estimated at 4.15% in 2016-17 significantly higher than the1.20% in 2015-16.

• Service sector estimated to grow at 8.90% in 2016-17.

• The adverse impact of demonetisation on GDP growth will be transitional. Demonetisation to affect growth rate by 0.25-0.50% but willgenerate long term benefits.

• Demonetisation may affect supplies of certain agricultural products like sugar, milk, potatoes and onions.

• The survey has suggested growth to return to normal as new currency comes in circulation. The remonetisation will ensure that thecash squeeze is eliminated by April 2017. Tax administration could be improved to reduce discretion and improve accountability.

• Expecting fiscal windfall from Pradhan Mantri Garib Kalyan Yojana (PMGKY) and low oil prices.

• Fiscal gains from Goods and Services Tax (GST) will take time to realise. However GST and other structural reforms should take thegrowth rate to 8-10%.

• India is well positioned to take advantage of China’s deteriorating competitiveness due to lower wage costs in most Indian states.Implementation of wage hike and muted tax receipts to put pressure on fiscal deficit in 2017-18. Labour migration in India increasingat an accelerating rate. India’s trade GDP ratio is now greater than China’s.

3

UNION BUDGET---------------------------

2017-18

• Setting up of a Centralized Public Sector Asset Rehabilitation Agency that will look after the most difficult cases and makepolitically tough decisions to reduce debt.

• The current account deficit (CAD) narrowed in the first half of 2016-17 to 0.30% of GDP.

• FDI reform measures were implemented allowing India to become one of the world’s largest recipients of FDI.

• The survey registered an improvement in the financial position of the states over the last few years. The average revenue deficithas been eliminated, while the average fiscal deficit was curbed to less than 3% of GSDP. The average debt to GSDP ratio has alsofallen.

• The survey states that gross NPAs has climbed to almost 12% of gross advances for public sector banks at end September 2016. Atthis level, India’s NPA ratio is higher than any other major emerging market, with the exception of Russia.

• The survey points out that the capacity of the state in delivering essential services such as health & education is weak due to lowcapacity, with high levels of corruption, clientelism, rules & red tape. At this level, competitive populism is more in evidence thancompetitive service delivery.

• The survey advocates the concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an effort toreduce poverty. The 2 prerequisites for a successful UBI are : (a) functional JAM (Jan Dhan, Aadhar and Mobile) system as it ensures thatthe cash transfer goes directly into the account of a beneficiary and (b) Centre-State negotiations on cost sharing for the programme.

• The survey says Apparel and Leather industry are key to generation of formal and productive jobs. It recommends reforms in labour andtax policies to make the Apparel and Leather sector globally competitive. It also adds that these sectors provide immense opportunitiesfor creation of jobs for the weaker sections, especially for women, and can become vehicles for broader social transformation in thecountry.

State of the Economy

4

UNION BUDGET---------------------------

2017-18

Data Categories FY 2015-16 FY 2016-17

GDP Indicators

GDP at Constant Price (INR Lakhs Crores) 113.50 121.55

Growth Rate (in %) 7.60% 7.10%

GVA at Basic Prices (2011-12 Prices) (INR Lakhs Crores) 104.27 111.53

Growth Rate (in %) 7.20% 7.00%

External Sector

Balance of Payment Development

Foreign Exchange Reserve (US$ Billion) 359.75 360.77*

Exchange Rate (USD/INR) 65.44 67.19**

*As on 20th January, 2017

** April 16 to January 17

Economic Performance


5

UNION BUDGET---------------------------

2017-18

Data Categories FY 2015-16 FY 2016-17

Fiscal Indicators (as % of GDP)

Fiscal Deficit (in %) 3.90% 3.50%

Revenue Deficit (in %) 2.50% 2.30%

Industrial Performance

Index of Industrial Production (in %) (April to November) 3.80% 0.40%

FDI Equity Inflow (US$ billion) (April to November) 24.80 32.49

Prices

CPI (WPI) (in %) (April to December) -2.99% 2.85%

CPI (IW) (in %) (April to December) 5.65% 4.74%

Economic Performance


6

UNION BUDGET---------------------------

2017-18

Data Categories FY 2015-16 FY 2016-17 (AE*)

AGRICULTURE, FORESTRY & FISHING 1.20% 4.10%

INDUSTRY

Mining & Quarrying 7.40% -1.80%

Manufacturing 9.30% 7.40%

Electricity, Gas, Water Supply & Other Utility Services 6.60% 6.50%

Construction 3.90% 2.90%

SERVICES

Trade, Hotels, Transport, Communication and Services related to broadcasting 9.00% 6.00%

Financial, Real Estate & Professional Services 10.30% 9.00%

Public Administration, Defence and Other Services 6.60% 12.80%

Sector Wise Performance

*AE- Advance Estimates


7

UNION BUDGET---------------------------

2017-18Budget Financials

Sl. No. Particulars FY 15-16 FY 16-17 FY 16-17 FY 17-18

Actuals Budget Estimates Revised Estimates Budget Estimates

1 Revenue Receipts 1,195,025 1,377,022 1,423,562 1,515,771

2 Capital Receipts 595,748 621,038 590,845 630,964

3 Total Receipts (1+2) 1,790,773 1,998,060 2,014,407 2,146,735

4 Revenue Expenditure 1,537,761 1,731,037 1,734,560 1,836,934

5 Capital Expenditure 253,022 247,023 279,847 309,801

6 Total Expenditure (4+5) 1,790,783 1,978,060 2,014,407 2,146,735

7 Revenue Deficit 342,736 354,015 310,998 321,163

8 Fiscal Deficit 532,791 533,904 534,274 546,532

9 Primary Deficit 91,132 41,234 51,205 23,454

In Rupees CroreBudget at a Glance

8

UNION BUDGET---------------------------

2017-18Uniqueness, Emphasis and Growth Drivers

• The presentation of the Budget has been advanced to 1st February to enable the Parliament to avoid a Vote on Account and pass asingle Appropriation Bill for 2017-18 before the close of the current financial year. This would enable the Ministries andDepartments to operationalise all schemes and projects, including the new schemes right from the commencement of the nextfinancial year. They would be able to fully utilise the available working season before the onset of the monsoon.

• The merger of the Railways Budget with the General Budget. Government has discontinued the colonial practice prevalent since1924. This decision brings the Railways to the centre stage of Government fiscal policy and would facilitate multi modal transportplanning between railways, highways and inland waterways. The functional autonomy of Railways will, however continue.

• The Government has done away with the plan and non-plan classification of expenditure. This will give a holistic view ofallocations for sectors and ministries. This would facilitate optimal allocation of resources.

• This budget is presented amongst tough challenges, recent developments and upcoming events. E.g. passage of the ConstitutionAmendment Bill for GST and the progress for its implementation ; and demonetisation of high denomination bank notes.

• Two themes out of the ten distinct themes are worth noting in the budget proposal:-• Digital Economy : For speed, accountability and transparency - It is a digital economy budget. Government has pushed the

digital theme in every area of the budget. Every person from a small shops to consumers are pushed towards the digitaleconomy.

• Tax Administration : Honouring the honest - The issues of honest tax payers has been acknowledged and strict implicationsfor fraudsters has been planned.

• For the first time, a consolidated Outcome Budget, covering all Ministries and Departments, is being laid along with the otherBudget documents. This will improve accountability of Government expenditure.

• Government has undertaken detailed analysis of tax payer’s data available from various department before proposing various taxmeasures in this budget.

How this Budget is different

9

UNION BUDGET---------------------------

2017-18

• Government has tried to move from-

• Discretionary based administration to policy and system based administration.• Favoritism to transparency and objectivity in decision making.• Blanket and loose entitlements to targeted delivery.• Informal economy to formal economy.

How this Budget is different

Uniqueness, Emphasis and Growth Drivers

Emphasis of Budget• Overall approach of this Budget has been to :-

• Spend more in rural areas, infrastructure and poverty alleviation• Maintain the best standards of fiscal prudence• Continue with economic reforms, promote higher investments and accelerate growth

• The agenda has been "Transform, Energise and Clean India" that is, TEC India :-

• Transform the quality of governance and quality of life of people of India• Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true

potential• Clean the country from the evils of corruption, black money and non-transparent political funding. This is a new definition

of clean India as earlier the focus was only in Swachh Bharat.

• This is a progressive budget that invests heavily in technology and digitization. The focus on digital payments will lead torevolutionary transformation in Indians payment habits. Digital payments will be the new normal in 2017. As we become moredigital, India will see new taxpayers and better transparency in incomes.

10

UNION BUDGET---------------------------

2017-18

• Demonetisation of high denomination bank notes which will bring the benefit by way of surplus liquidity in banking system, willlower borrowing cost, increase the access to credit and will boost economic activity with multiplier effects.

• Passage of constitution bill for GST and progress for its implementation which will bring spurring growth, competitiveness,indirect tax simplification and greater transparency.

• Enactment of the Insolvency and Bankruptcy Code; amendment to the Reserve Bank of India Act for inflation targeting;enactment of the Aadhar bill for disbursement of financial subsidies and benefits.

• Increased digitalization in all sectors of economy by government to bring in transparency and better governance therebyimproving the quality of life of common people.

• Prudent Fiscal Management to ensure optimal deployment of resources and preserve fiscal stability.

• Energise various sections of society, especially the youth and the vulnerable, and enable them to unleash their true potential

• Abolition of “Foreign investment Promotion Board” (FIPB) soon.

• Accrual based accounting system will be rolled out in Railways by 31st March 2019.

• Revised mechanism and procedure to ensure time bound listing of identified CPSEs on stock exchanges.

• Increase in public infrastructure and development projects.

• In the Annual Conclave of Tax officers called ‘Rajaswa Gyan Sangam’ held in June 2016, the Prime Minister had expressed hisdesire to bring reforms in tax administration in the form of an approach of RAPID which stands for Revenue, Accountability,Probity, Information and Digitization.

Growth Drivers

Uniqueness, Emphasis and Growth Drivers

11

UNION BUDGET---------------------------

2017-18Direct Tax Proposals

Rates of taxes

Sl.No.

Particulars Rate of tax

1. where the total income does not exceed Rs. 2,50,000

“Nil”

2. where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000

5% of the amount by which the total income exceeds Rs. 2,50,000;


Rs. 12,500 plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000;

4. where the total income exceeds Rs. 10,00,000

Rs. 1,12,500 plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000.

In case of individual/HUF/AOP/BOI/Artificial juridical person

Surcharge: - Total income between Rs. 50 Lakhs to Rs 1 crore – 10%; and Total income exceeding Rs. 1 crore – 15%

12

UNION BUDGET---------------------------

2017-18

Rates of taxes

Sl.No.


1. where the total income does not exceed Rs. 3,00,000

“Nil”


5% of the amount by which the total income exceeds Rs. 3,00,000;


Rs. 10,000 plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000;

4. where the total income exceeds Rs. 10,00,000 Rs. 1,10,000 plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000.

In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year —

Surcharge: - Total income between Rs. 50 Lakhs to Rs 1 crore – 10%; and Total income exceeding Rs. 1 crore – 15%


13

UNION BUDGET---------------------------

2017-18

Rates of taxesIn the case of domestic Company:

Sl. No.


1. where its total turnover or the gross receipt in the previous year 2015-16 does not exceed fifty crore rupees;

25% of total income

2. other than that referred to in item (i) 30% of total income

Surcharge:(i) in the case of every domestic company,––

a. having a total income exceeding one crore rupees but not exceeding ten crore rupees, at the rate of seven per cent of such income-tax; and

b. having a total income exceeding ten crore rupees, at the rate of twelve per cent of such income-tax;(ii) in the case of every company other than a domestic company,––

a. having a total income exceeding one crore rupees but not exceeding ten crore rupees, at the rate of two per cent of such income-tax; and

b. having a total income exceeding ten crore rupees, at the rate of five per cent of such income-tax:


14

UNION BUDGET---------------------------

2017-18

Personal Taxation…

Sl.no.Clause & Section

ReferenceProposal Impact

1Clause (3)(a) -Section 2(42A)

Change in definition of long term capital gain in the case of immovable property – Reduction in holding period from 3 years to 2 years.

If the immovable property is held formore than 2 years and then sold, it will betreated as long term capital gain.

2Clause (3)(b)(A) - Section 2(42A)

Insertion of new sub-clause ‘hf’ w.e.f 01 April 2018 – period ofholding of preference shares will also be considered in caseof transfer of equity shares as per section 47(xb).

Provides clarity on the period of holding.

3Clause (3)(b)(B) - Section 2(42A)

Insertion of new sub-clause ‘hg’ w.e.f 01 April 2018 – periodof holding of unit or units in the consolidating plan of amutual fund scheme will also be considered in case oftransfer of equity shares as per section 47(xix).

Provides clarity on the period of holding.

4Clause (4) -Section 9

Insertion of new explanation 5A in section 9(1)(i) w.e.f 01April 2012 –Investors referred to section 115AD and registeredas Category-I or Category-II foreign portfolio investor SEBIare exempt from indirect transfer of shares subject to certainconditions.

This is a welcome move as it excludes FIIand will boost FDI.

5Clause (5) -Proviso to Section 9

Insertion of new proviso after sub-section 3 clause (j) w.e.f.01 April 2016 – nothing contained in the proviso will beapplicable to eligible investment fund which is wound up inthe previous year.

Provides clarification of the definition toeligible investment fund.


15

UNION BUDGET---------------------------

2017-18




6Clause (6) - Section 10

(12B)

New clause 12(B) has been inserted w.e.f 01 April2018 – Partial withdrawal of NPS in accordance tothe pension scheme exceeding 25% shall betaxable.

The existing provision provide for exemptionat the time of closure of his account or optingout.

The new provision proposes to exemptwithdrawal made upto 25% in accordance tothe conditions.

7Clause (6) - Section

10(23C)

New sub-clause (iiiaaaa) inserted to include theChief Minister’s Relief Fund or the LieutenantGovernor’s Relief Fund in respect of any State orUnion territory as referred to in sub-clause (iiihf) ofclause (a) of sub-section (2) of section 80G;

--

8 Clause (6) - Section 10 Insertion of new proviso after proviso 11 of section10(23C) w.e.f 01 April 2018 – for the purpose ofapplication of income, any amount paid out ofincome with a specific direction that they shallform part of the corpus of the trust or institution,of any trust shall not be considered as applicationof income, the same will not be considered asapplication of income.

Clarity provided on whether voluntarycontributions made towards corpus fund forthe purposes of application of income.

Benefit is restricted to the doneetrust/institution as against benefit beingprovided to both donor and donee trust.

9 Clause (6) - Section 10 (37A)(new)

New clause 37A introduced w.r.t exemption ofcapital gains on transfer of specific asset due to re-organization of Andhra Pradesh subject to certainconditions.

Will benefit those from whom land had beenacquired for the purpose of re-organization.


16

UNION BUDGET---------------------------

2017-18





(38)

Insertion of new proviso in clause 38 after thesecond proviso w.e.f 01 April 2018 – the provisionsof clause 38 shall not apply to any income arisingfrom the transfer of a long-term capital asset,being an equity share in a company, if thetransaction of acquisition, other than theacquisition notified by the Central Government inthis behalf, of such equity share is entered into onor after the 1st day of October, 2004 and suchtransaction is not chargeable to securitiestransaction tax under Chapter VII of the Finance(No. 2) Act, 2004.

Clarification provided on applicability of clause38 of section 10.


(48B)

W.e.f 01 April 2018, income accruing or arising to aforeign company on account of sale of leftoverstock of crude oil, if any, from the facility in Indiaafter the expiry of the agreement or thearrangement referred to in clause (48A) subject tosuch conditions as may be notified by the CentralGovernment in this behalf.

Provides clarity on sale of crude oil after theexpiry of agreement.


10AAMethod of computation of deduction undersection 10AA has been explained.

It has been clarified that 10AA deduction shallbe allowed on the total income computed inaccordance to the provisions of this Act andthe total deduction u/s 10AA shall not exceedthe total income.


17

UNION BUDGET---------------------------

2017-18

Corporate TaxationSl.no. Clause & Section


13 Clause (8) - Section 11

Insertion of explanation in section 11(1) clarifyingthat amounts paid/credited to any trust/institutionregistered u/s 12AA with a specific direction thatthey shall for part of the corpus of thetrust/institution, shall not be treated as applicationof income for charitable/religious purpose. This isw.e.f 01 April 2018.

Clarity provided on whether voluntarycontributions made towards corpus fund forthe purposes of application of income.

Benefit is restricted to the doneetrust/institution as against benefit beingprovided to both donor and donee trust.


12A

In case of modification of the objects of thetrust/institution which do not conform to theconditions prescribed at the time of registration,then within 30 days of adoption of themodification, the institution/trust has to apply forfresh registration.

This is to ensure that the conditions prescribedwhile issue of registration u/s 12A is fulfilled.


12A

In order to apply for registration u/s 12A, it hasbeen made mandatory for the trust/institution tofile the return of income u/s 139(4A) for theprevious year .

This is to ensure that those trusts/institutionswho have not filed the return of income forthe previous year are not registered u/s 12A.


18

UNION BUDGET---------------------------

2017-18

Corporate Taxation…Sl.no. Clause & Section



13A

Donation exceeding Rs. 2,000/- has to be receivedby political parties only in the following forms:• Account payee cheque• Account payee draft/use of ECS• Electoral bonds

Also, In order to claim exemption u/s 13A, politicalparty has to furnish the return of income for theprevious year u/s 139(4B) on or before the duedate under that section.

Additional condition introduced for claimingexemption of income by political parties u/s13A.

Also will ensure transparency in funding ofpolitical parties.

17Clause (12) - Sections

23

In case of property being land and buildingappurtenant thereto is held as stock in trade andthe property is not let out during the whole or anyparty of the previous year, up to one year, theannual value will be considered as “NIL” After oneyear, the person holding property as stock-in-tradehas to pay tax on notional value of rent.

Move to tax those in real estate sector whokeep property vacant even after receipt ofcompletion certificate after giving a timeperiod of 1 year.


35AD

In addition to disallowance of capital expenditureincurred on the acquisition of any land or good willor financial instrument, any expenditure made inexcess of Rs. 10,000 otherwise than by an accountpayee cheque, draft or ECS mechanism shall alsobe not considered for the purpose of deductionu/s 35AD.

Move towards digitization of economy.


19

UNION BUDGET---------------------------

2017-18



19 Clause (14) (36) (1)(viia)

Deduction in respect of provision for bad anddoubtful debts provided by banks increased from7.5% to 8.5% w.e.f 01 April 2018.

Banks to be benefited from increase indeduction in provision.


40ALimit for cash expenditure reduced toRs. 10,000 from Rs. 20,000 w.e.f 01 April 2018.

Move towards cashless economy.


43

Exclusion of expenditure incurred in cash in excessof Rs. 10,000 from the cost of asset as defined u/s43.

Reduction in the cost of asset newlypurchased to the extent of cash expense ofmore than Rs. 10,000 and also move towardscashless economy.


43

In case of any capital asset in respect of whichdeduction u/s 35AD is deemed to be the income ofthe assessee, the actual cost shall be the actualcost as reduced by depreciation calculated at therate in force that would have been allowable hadthe asset been used for the purposes of businesssince the date of its acquisition.

Provides clarity on cost of acquisition onassets on which deduction u/s 35AD has beenclaimed. This is w.e.f 01 April 2018.


43B

Non-payment of Interest on loans and advancesfrom co-operative bank other than a primaryagricultural credit society or a primary co-operative agricultural and rural development bankshall be disallowed u/s 43B.

To benefit co-operative banks.


20

UNION BUDGET---------------------------

2017-18

Corporate Taxation…



24 Clause (18) – 43D

Benefit of section 43D is extended to co-operativebanks also. W.e.f 01 April 2018, interest on NPA tobe taxed in the year of receipt and not on accrualbasis even for co-operative banks.

To benefit co-operative banks.


44AA

W.e.f 01 April 2018, monetary limit for bookkeeping increased for individual/HUFGoing forward, books of accounts have to bemaintained if income from business or professionexceeds Rs. 250,000/- or the turover/gross receiptsexceed Rs. 10 lakhs in any one of the three yearsimmediately preceding the previous year.

--


44AB

The provisions of section 44AB will not beapplicable to persons who declare income u/s44AD and the turnover/gross receipts does notexceed Rs. 2 crores in such previous year.

Reduction in compliance cost to assessee’sdeclaring income u/s 44AD.


44AD

Presumptive tax rate reduced from 8% to 6% inrespect of the amount of total turnover or grossreceipts which is received by an account payeecheque or an account payee bank draft or use ofECS through a bank account during the previousyear or before the due date specified in subsection(1) of section 139 in respect of that previous year.

Reduction in tax rate for those who opt forpresumptive taxation u/s 44AD.


21

UNION BUDGET---------------------------

2017-18

Sl.no. Clause & Section Reference

Proposal Impact

28 Clause (22) - 45

Incidence of capital gains tax in the case of JDAentered into by an individual or HUF for thedevelopment of a property is specified. It will betaxed only on completion of the project and onreceipt of completion certificate from thecompetent authority.The value of consideration shall be the stamp dutyvalue on the date of receipt of completioncertificate.The above provision is effective from 01 April 2018

Much required clarity on taxability of JDAprovided. This will reduce litigation. This willalso boost real estate sector.


47 (viaa) (new)

Transfer of rupee denominated bond of an IndianCompany issued outside India between two non-residents shall not be treated as transfer for thepurpose of capital gains tax.

Welcome move for non-residents who areholding rupee denominated bonds of anIndian Company.


47 (xb) (new)Transfer by way of conversion of preference shareto equity share will not be treated as transfer.

Welcome clarification. Will avoid litigation.


48

Definition of indexed cost of acquisition has beenamended. W.e.f 01 April 2018, for the purpose ofcomputing indexed cost of acquisition, the baseyear will be 01 April 2001 instead of 01 April 1981.

This will help in reduction of capital gains taxas the cost of acquisition will increase.


22

Corporate Taxation…

UNION BUDGET---------------------------

2017-18




49 (2AE) (new)

Cost of acquisition for converted equity shares hasbeen defined. The cost of acquisition would bethat part of the cost of preference share inrelation to which such equity share was acquired.

Clarity on cost of acquisition. Will avoidlitigation.


49 (2AF) (new)

Cost of acquisition defined in the case of transferof capital asset referred to section 47 (xix)defined. The cost of acquisition shall be deemedto be the cost of acquisition to him of the unit orunits in the consolidating plan of the scheme ofthe mutual fund.



49(6) (new)

Cost of acquisition in the case of specified assetacquired due to reorganisation of Andhra Pradeshshall be deemed to be its stamp duty value as onthe last day of the second financial year after theend of the financial year in which the possessionof the said specified capital asset was handed overto the assessee.



23

UNION BUDGET---------------------------

2017-18




50CA (new)

W.e.f 01 April 2018, new section 50CA has beenintroduced. As per this section, if theconsideration received or accruing as a result ofthe transfer by an assessee being share of acompany other than a quoted share, is less thanthe fair market value of such share, the value sodetermined shall, for the purposes of section 48,be deemed to be the full value of considerationreceived or accruing as a result of such transfer.

--


54EC

W.e.f 01 April 2018, investments in bonds notifiedby the Central Government in this behalf shall alsobe available for claiming exemption of capitalgains.

--


55 In the term cost of any improvement, 01 April 1981has been substituted by 01 April 2001.

--


56(vii), 56(viia)This section has been amended and a new sub-section 56(x) has been brought in.

--


56(x) (new)

The new section replaces section 56(vii) and56(viia) on taxation of amount received with outconsideration or less consideration.

--


24

UNION BUDGET---------------------------

2017-18




71

W.e.f 01 April 2018, set off of loss under the head“income from house property” with other headsof income is restricted to Rs. 200,000/-.

Loss in excess of Rs. 200,000/- has to carriedforward to be set off in the next year underthe “income from house property only.


79 (new)

A new section 79 has been substituted for the oldsection 79. In the new section 79, set-off andcarry-forward provisions applicable for start-upcompanies which are closely held have beenprovided. As per the new section, a start-upcompany can carry forward and set-off against,against the income of the previous year, only if theprescribed conditions are fulfilled.

--


80CCD

Restriction on claim of contribution made under apension scheme by a Central Governmentemployee has been increased to 20% of his salaryin the previous year (in case of an employee) and20% of his gross total income (in case of otherindividual assessee).

Assessee is eligible for more deduction fordepositing in his account under any CentralGovernment notified pension scheme uptospecified limits. However the overall cap ofRs. 150,000/- has not been increased.


25

UNION BUDGET---------------------------

2017-18




80CCG(5) (new)

No deduction shall be allowed u/s 80CCG inrespect of investment made under an equitysavings scheme. However, in case where theassessee has claimed the benefit under thissection on or before 01 April 2017, the deductionshall be available till the assessment yearcommencing on 01 April 2019.

This will have a negative impact on theinvestment to be made by an individual.


80G(5D)Donation made in excess of Rs. 2,500 in cash shallnot be eligible for deduction u/s 80G.

Move towards cashless economy and curbblack money.


80-IAC

W.e.f 01 April 2018, deduction under this sectionfor eligible start-ups would be available for 3 outof 7years instead of 3 out of 5 years.

Will help start ups as it may be difficult to earnprofits in the first 5 years.


80-IBA

One of the conditions for claiming deduction inrespect of profits and gains from housing projectsis to complete the project by 3 years. However,this has been increased to 5 years.In clause (c ) and (f), the expression built-up areahas been substituted by carpet area.Carpet area shall have the same meaning asassigned to it in clause (k) of section 2 of theReal Estate (Regulation and Development) Act,2016.The above amendment will be w.e.f 01 April 2018.

Will help real estate sector as some projectsmay not be completed within 3 years.


26

UNION BUDGET---------------------------

2017-18




87A

Rebate u/s 87A is available to an individual residentwhose income is less than Rs. 300,000 and theamount of rebate shall be either the 100% of thetax amount or Rs. 2,500 which ever is less.

This is w.e.f 01 April 2018.

48Clause (39) – Section

90

A new explanation has been introduced forclarification purposes. As per the said explanationwhere any term used in an agreement which isdefined under the said agreement, the said termshall have the same meaning as assigned to it inthe agreement; and where the term is not definedin the said agreement, but defined in the Act, itshall have the same meaning as assigned to it inthe Act and any explanation given to it by theCentral Government.”

--


27

UNION BUDGET---------------------------

2017-18




92A

A new explanation has been introduced forclarification purposes. As per the said explanationwhere any term used in anagreement entered into under sub-section (1) isdefined under the said agreement, the said termshall have the same meaning as assigned to it inthe agreement; and where the term is not definedin the said agreement, but defined in the Act, itshall have the same meaning as assigned to it inthe Act and any explanation given to it by theCentral Government.”

--


92BA

Change in the meaning of Specific DomesticTransaction – Transactions between relatedparties referred to in section 40A(2)(b) is outsidethe purview of the definition.

Reduction in Compliance cost or burden.


28

UNION BUDGET---------------------------

2017-18




92CE (New)

W.e.f FY 2018-19 where any primary adjustment ismade to transfer price, the assessee shall makesecondary adjustments.

Exception – If the primary adjustment made in anyprevious year does not exceed one crore rupeesand the primary adjustment is made in respect ofan assessment year commencing on or before the1st day of April, 2016.

If based on adjustment, if there is any increase inthe total income or reduction in loss, the sameshall be deemed to be advance and suchassociated enterprise and the interest on suchadvance, shall be computed in such manner as maybe prescribed.

Will lead to revision of books of accounts andto what extent the assessee is ready to revisethe books is a debatable issue.

Even interest chargeable of the deemedadvance is a debatable issue and will lead totaxation of Notional Interest Income.


29

UNION BUDGET---------------------------

2017-18



52Clause (43) -

Sec.94B (New)

Limitation on Interest deduction in certain cases –Subject to the conditions prescribed, interestdeduction on payment of interest in respect of anydebt issued by a non-resident, associated enterprise,the interest shall be restricted to 30% of EBITDA of theborrower in the previous year or interest paid orpayable to associated enterprises for that previousyear, whichever is less.

If any of the assessment years, the interestexpenditure is not wholly deducted, the same carriedforward to the following assessment year/years andset-off against the profits and gains.

It shall not be carried forward for more than 8Assessment Years.

Discouraging borrowings from the foreignAssociated Enterprises, by keeping thelimitation on the allowance of interest underPGBP.

53 Clause (44) -Section 115BBDA

W.e.f 01 April 2018, section 115BBDA shall be applicablespecified assessee. Specified assessee defined toinclude a person other than a domestic Company,institution referred to u/s 10(23C) (iv), (v), (vi) & (via)or trust registered u/s12AA.

Widened the tax base by bringing in ForeignCompanies, Other artificial judicial personsunder purview.

54 Clause(45) -Section 115BBG

(New)

Transfer of carbon credits to be taxed at a flat rate of10% on the gross amount. --


30

UNION BUDGET---------------------------

2017-18




115JJA

MAT credit is not available on foreign tax credits.

MAT credit can be availed upto 15 assessmentyears as against 10 assessment years.

Will impact the carry forward of MAT creditfor Companies who have high foreign taxcredit.


115 JB

Computation of books profit for the purpose ofsection 115JB has been introduced for thosecompanies financial statements are drawn up incompliance to the Indian Accounting Standardsspecified in Annexure to the Companies (IndianAccounting Standards) Rules, 2015.

Clarity provided on computation of booksprofit for Companies following IndianAccounting Standards.

57 Clause (48) - Section115 JD

AMT credit is not available on foreign tax credits.

AMT credit can be availed upto 15 assessmentyears as against 10 assessment years.

Will impact the carry forward of AMT creditfor Companies who have high foreign taxcredit.


132

A new explanation has been introduced wherein ithas been clarified that the reason to suspect, asrecorded by the income-tax authority under thissub-section, shall not be disclosed to any person orany authority or the Appellate Tribunal.”New provision for provisional attachment of anyproperty belonging to the assessee subject toconditions prescribed.

--


31

UNION BUDGET---------------------------

2017-18




132A

A new explanation has been introduced wherein ithas been clarified that the reason to suspect, asrecorded by the income-tax authority under thissub-section, shall not be disclosed to any person orany authority or the Appellate Tribunal.”

--


133APower of survey extended to trust/institutionscarrying on charitable activity.

--


139

The following persons have to file the return ofincome–• person referred to in section 10 (23AAA).• Investor Protection Fund referred to in 10

(23EC) or 10 (23ED) Core SettlementGuarantee Fund referred to in 10 (23EE).

• Board or Authority referred to in 10 (29A).

Extended the scope for filing Return of Incometo various other category of persons whoseincome is exempted.


32

UNION BUDGET---------------------------

2017-18

Return of Income & Assessment Procedures…


Proposal Impact


139

Time limit for filing of revised return has beenreduced. Time limit for the revising the return shallbe any time before the end of the relevantassessment year or before the completion of theassessment, whichever is earlier.

As the time for revision is reduced, assesseeshave to ensure that the revision of return, ifany is completed on time.


143

For returns filed after 01 April 2017, if notice u/s143(2) has been served, processing of return shallnot be necessary.

This will reduce administrative cost to thedepartment.


33

UNION BUDGET---------------------------

2017-18


Changes in Time limits for Assessment – Section 153

Ref Particulars Present Proposed

153(1) Assessment u/s 143 or 14421 months from the end of theassessment year in which the incomewas first assessable.

For AY 18-19 – 18 Months.

From AY 19-20 onwards – 12months .

153(2)Assessment, reassessment or re-computation u/s 147

9 months from the end of the financialyear in which the notice under section148 was served.

12 months from the end of thefinancial year in which thenotice under section 148 wasserved.

153(3)

an order of fresh assessment in pursuanceof an order under section 254 or section263 or section 264, setting aside orcancelling an assessment

9 months from the end of the financialyear in which the order under section254 is received .

12 months from the end of thefinancial year in which theorder under section 254 isreceived.


34

UNION BUDGET---------------------------

2017-18


Proposal Impact


153AMonetary limit of 50 lakhs has been introduced forAssessment in case of search or requisition.

--


153B

Time limit for completion of making theassessment or reassessment u/s 153C has beenamended to 18 months from the end of thefinancial year in which the last of the authorisationfor search under section 132 or for requisitionunder section 132A was executed or 12 monthsfrom the end of the financial year in which booksof account or documents or assets seized orrequisitioned are handed over under section 153Cto the Assessing Officer having jurisdiction over

such other person, whichever is later:

--


153C

After the words “total income of such otherperson”, the words “for six assessment yearsimmediately preceding the assessment yearrelevant to the previous year in which search isconducted or requisition is “made and” shall beinserted;

The concept of Six Assessments years in case ofSearch and Seizure has been extended toSec.153C (Assessment of Income of any otherperson).



35

UNION BUDGET---------------------------

2017-18


Proposal Impact


155

Where any tax paid in the foreign territory referredto in Sec.90, 90A or 91 and no tax credit has beenallowed during the assessment on the ground thattax paid was under dispute, and if subsequentlysuch dispute is settled; and the assessee, within sixmonths from the end of the month in which thedispute is settled, furnishes to the AssessingOfficer evidence of settlement of dispute andevidence of payment of such tax along with anundertaking that no credit in respect of suchamount has directly or indirectly been claimed orshall be claimed for any other assessment year, theAssessing Officer shall amend the order ofassessment or any intimation or deemedintimation under sub-section (1) of section 143, asthe case may be, and the provisions of section 154shall, so far as may be, apply thereto:

This section enables the assesse to claim theamount of tax paid in foreign territory aftersettlement of dispute and correspondingly,enables the Assessing officer to revise theintimation u/s 143(1) or u/s 154 as the case maybe.



36

UNION BUDGET---------------------------

2017-18


Proposal Impact


194-IB (New)

Any person, being an individual or a Hinduundivided family (other than those referred to inthe second proviso to section 194-I), responsiblefor paying to a resident any income by way of rentexceeding fifty thousand rupees for a month orpart of a month during the previous year, shalldeduct an amount equal to five per cent. of suchincome as income-tax thereon.However, provisions of Sec.203A w.r.t TAN shallnot be applicable for the assessee liable to deductTDS under this section.

• Extension provision for TDS on rent whereremittance is made by a Individual or HUF.

• Rent should exceed 50,000 per month orpart of a month.

• Rate of TDS shall be 5%.


194IC (New)

Notwithstanding anything contained in section194-IA, any person responsible for paying to aresident any sum by way of consideration, notbeing consideration in kind, under the agreementreferred to in sub-section (5A) of section 45, shallat the time of credit of such sum to the account ofthe payee or at the time of payment thereof incash or by issue of a cheque or draft or by anyother mode, whichever is earlier, deduct anamount equal to ten per cent. of such sum asincome-tax thereon.

• Transfer of a capital asset, being land orbuilding or both, under a specifiedagreement (JDA’s ect – Refer 45(5A)), byassessee, being an individual or a Hinduundivided family.

• Rate of TDS shall be 10%.

TDS Provisions –


37

UNION BUDGET---------------------------

2017-18


Proposal Impact


194 J

The following proviso shall be inserted with effectfrom the 1st day of June, 2017, namely:— “Providedalso that the provisions of this section shall haveeffect, as if for the words “ten per cent.”, thewords “two per cent.” had been substituted in thecase of a payee, engaged only in the business ofoperation of call centre.”.

Where the Payee is engaged only in thebusiness of operation of call center, Rate ofTDS shall be 2% instead of 10%.

71Clause (66) - Section –

194 LA

“Provided further that no deduction shall be madeunder this section where such payment is made inrespect of any award or agreement which has beenexempted from levy of income-tax under section96 of the Right to Fair Compensation andTransparency in Land Acquisition, Rehabilitationand Resettlement Act, 2013.

Where the transaction is exempted by virtue ofLand Acquisition, Rehabilitation andResettlement Act, 2013 No Tax shall bededucted.


194LC

With effect from the 1st day of April, 2018 - “1st dayof July, 2017”, shall be substituted as “1st day ofJuly, 2020”.

With effect from the 1st day of April, 2016—inrespect of monies borrowed by it from a sourceoutside India by way of issue of rupee denominatedbond before the 1st day of July, 2020.

Scope of this section has been extended for loanagreements entered upto 1st July 2020 as against1st July 2017.

Rupee denominated bonds are bought under thepurview of this section.

Rate of TDS shall be 5%.

TDS Provisions –


38

UNION BUDGET---------------------------

2017-18


Proposal Impact


194LD

With effect from the 1st day of April, 2018 - “1st dayof July, 2017”, shall be substituted as “1st day ofJuly, 2020”.

Provisions of this section extended upto 1st

July 2020.

Rate of TDS shall be 5%.


206C

For the words and brackets “or Jewellery or anyother goods (other than bullion or Jewellery)”, thewords and brackets “or any other goods (otherthan bullion)” shall be substituted;In sub-section (1E), the words “or Jewellery” shallbe omitted.

The word Jewellery is omitted, thus norequirement of collection of Tax (TCS) onJewellery sales.

75Clause (72) - Section –

206CC (new)

Notwithstanding anything contained in any otherprovisions of this Act, any person paying any sumor amount, on which tax is collectible at sourceunder Chapter XVII-BB (herein referred to ascollectee) shall furnish his Permanent AccountNumber to the person responsible for collectingsuch tax (herein referred to as collector), failingwhich tax shall be collected at the higher of thefollowing rates, namely :• at twice the rate specified in the relevant

provision of this Act; or• at the rate of five per cent.

Thus the buyers are required to furnish theirPermanent Account Number (PAN) otherwise,the tax collection rate shall be higher of thefollowing rates,i. at twice the rate specified in the relevant

provision of this Act; orii. at the rate of five per cent.

TDS Provisions –


39

UNION BUDGET---------------------------

2017-18


Proposal Impact


234F (New)

W.e.f AY 2018-19, where an Assessee fails to file areturn of Income or fails to furnish the Return ofIncome with in the time prescribe u/s 139(1), the afee will be levied as follows –• 5,000/- if return is furnished on or before 31st

December of assessment year• Other cases 10,000/-• If Total Income does not exceed 5,00,000/- then

fee payable shall not exceed 1,000/-

• Additional Fees for Non-filing of Returnof Income and Delay in filing of Return ofIncome.

• Applicable for Nil Returns or Caseswhere refund claim is made.

• Sec.271F, penalty of Rs.5,000/- shallstand withdrawn from AY 2018-19.

77Clause (83 & 84) -

Section 269ST (New) & Section 271DA (New)

No person shall receive an amount of three lakhrupees 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 personotherwise than by an account payee cheque or anaccount payee bank draft or use of electronic clearingsystem through a bank account.

Above provisions shall not be applicable toGovernment, Banking Companies, Post office savingsBank or co-operative bank.

Contravention of provisions of Sec.269ST willlead to a Penalty u/s 271DA - a sum equal tothe amount of such receipt.

Fines & Penalties –


40

UNION BUDGET---------------------------

2017-18Indirect Tax Proposals

Excise, Customs, Sales Tax & Service TaxSl.no. Act & Section


1. Service Tax - Sec 66D (Negative List) Clause (f)

“Services by way of carrying out any processamounting to manufacture or production of goodsexcluding alcoholic liquor for humanconsumption” is omitted from negative list

• No Impact, since the same has been includedin the Mega Exemption Notification 25/2012

2. Service Tax (Determination of Value) Rules, 2006 –Rule 2A

a. In case of Works Contract, which are Original Works, the taxable value for Service Tax shall exclude not only the value of goods as it is currently, but also exclude Land or Undivided share of land

b. If the percentage option is adopted, then 30% shall be Taxable Service Value where the works contract includes value of Land or Undivided share of land

This amendment has been done with retrospective effect from 1st July 2012

Overall, it is beneficial for assessee’s taxable under Service Tax in case of a Joint Development agreement

3. Service Tax – Sec 104 newly inserted

No service tax leviable on one time upfrontamount, Premium, salami, cost, price,development charge or by whatever name calledin respect of taxable service provided or agreed tobe provided by a State Government industrialdevelopment corporation or undertaking toindustrial units by way of grant of long term leaseof thirty years or more of industrial plots

PERIOD OF BENEFIT: only from 01-06-2007 to21-09-2016

41

UNION BUDGET---------------------------




4. Customs Act, 1962 -Section 17 - Sub-section (3) substituted

(3) For verification of self-assessment the properofficer may require the importer, exporter or anyother person to any document or information,whereby the duty leviable on imported goods orexport goods, can be ascertained and thereupon,the importer or exporter shall produce suchdocument or furnish such information

Now the assessing officer can demand anydocument or information as against the earliersection which authorized only to demandcertain documents.

5. Customs Act, 1962 -Section 30A – newly inserted

Person-in-charge of the conveyance entering Indiafrom outside India shall deliver to proper officer;Arrival by Aircraft/Ship – manifest to be given

before arrivalArrival by vehicle – manifest to be given

upon arrivalPassenger name record information of arrivingpassengers in prescribed term

Failure attracts penalty up to Rs.50,000/-

6. Customs Act, 1962 -Section 41A – newly inserted

Person-in-charge of the conveyance departingIndia from outside India shall deliver to properofficer;Arrival by Aircraft/Ship – manifest to be given

before arrivalArrival by vehicle – manifest to be given

upon arrivalPassenger name record information of arrivingpassengers in prescribed term

Failure attracts penalty up to Rs.50,000/-

42

UNION BUDGET---------------------------




7. Customs Act, 1962 -Section 46 - Sub-section 3 substituted

As an effect• Bill of entry to be presented the next day of

arrival• Maybe presented within 30 days of expected

arrival

Delay attracts charges

8. Customs Act, 1962 -Section 47 - Sub-section 2 substituted

The importer shall pay the import duty—(a) on the date of presentation of the bill of entry in the case of self-assessment; or(b) within one day (excluding holidays) from the date on which the bill of entry is returned tohim by the proper officer for payment of duty in the case of assessment, reassessment orprovisional assessment; or(c) in the case of deferred payment under the proviso to sub-section (1), from such due dateas may be specified by rules made in this behalf

Currently 2 days, restricted going forward, inpayment of customs duty

9. Few important Customs Tariff Amendments

• Solar tempered glass for use in the manufactureof solar cells/panels/modules subject to actualuser condition

• Part / raw materials for manufacture of above• items of machinery required for fuel cell based

power generating systems to be set up in thecountry

• BCD 5% reduced to Nil

• CVD 12.5% reduced to 6%• BCD reduced to 5% and CVD reduced to 6%

43

UNION BUDGET---------------------------




10. Advance Ruling under Excise, Customs and Service Tax

• Authority for Advance Ruling shall be “Authorityfor Advance Ruling” as constituted under Sec245-O of the Income Tax Act, 1961

• All the pending cases shall be transferred to thesaid authority

Advance Rulings to be centralised withenhanced timelines to proceed towards oneAuthority for Advance Ruling under GST

• Fee for Advance Ruling Increased to Rs. 10,000from 2,500.

• Time limit to pronounce Advance Rulingincreased to 6 months from 90 days

11. CENVAT Credit Rules,2004

CENVAT, Rule 10 – Transfer of CENVAT credit timelimit introduced – 3 months (extendable by 6months)

Avail the pending credits before GST migration

12. Central Excise rules –Rule 21 - amended

Remission of duty time limit introduced – 3months (extendable by 6 months)

Avail the pending credits before GST migration

13. Few important Central Excise Tariff amendments

• Cigarettes, Cheroots, Bidis and tobacco

• Solar tempered glass for PV modules/cells• Part for manufacture of above

• Wind operated energy generator(subject toactual user condition)

• Across the product range excise dutyincreased ranging from 20% to 400%

• Excise duty increased from Nil to 6%• Excise duty reduced from 12.5% to 6% to

avoid inverted duty structure• Excise duty reduced from 12.5% to Nil

44

UNION BUDGET---------------------------

2017-18Impact on Infrastructure- Real Estate

• Following relaxation has been proposed in the conditions to qualify for 100% profit-linked deduction Section 80-IBA in the businessof developing qualifying affordable housing projects. This will facilitate higher investment in the sector and in turn achieve thegovernment’s ambitious goal of “Housing for all”.

• ‘Affordable Housing’ will be given coveted ‘Infrastructure’ status.• Size of residential unit will be measured as “carpet area” and not as “built-up area,”• Completion of project for claiming deduction will be increased from three years to five years from receipt of approval,• Size restriction of 30 square metres (323 square feet) for residential units shall apply only to metro cities (i.e. municipal limits

of Chennai, Delhi, Kolkata and Mumbai).

• With the change in criteria from built-up area to carpet area, the purchasers get more spacious homes and the builder is able tomarket the property to a larger segment of buyers. This shall make apartments in non-metros cheaper.

• Builders for whom constructed buildings are stock-in-trade, tax relief on unsold stock as tax on notional rental income will onlyapply after one year of the end of the year in which project is completed. This shall also act as a boost to overall supply in thehousing segment. This shall reduce the tax liability of the builders.

• Reduction in the holding period for computing long term capital gains from transfer of immovable property from 3 years to 2years. Also, the base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets includingimmovable property. This shall reduce the tax liability of the investor.

• For Joint Development Agreement signed for development of property, the liability to pay capital gain tax will arise in the year theproject is completed which shall bring clarity on the aspect and avoid litigation with the department and this encourages moreland holders to enter into development with realtors.

• Banks have already started reducing their lending rates, including those for housing. In addition, interest subvention for housingloans has also been announced by the Honourable Prime Minister. This shall boost the overall demand in the segment

• Benami Transactions Act will curb black money flow into real estate and also render holding of property under fictitious names asa punishable offence.

45

UNION BUDGET---------------------------

2017-18Impact on Infrastructure- Power

• India jumped 19 places in World Banks Logistics Performance Index 2016 to rank 35th amongst 160 countries.

• Demand for power has been increased as because residential consumption is growing at 14%.

• Many stranded gas and liquid fuel based power station would be competing with indigenous coal based power stations.

• Infrastructure sector is key for propelling India’s overall development and enjoys intense focus from government for initiatingpolicies that would ensure time bound creation of world class infrastructure in the country.

• India is the 3rd largest producer and 4th largest consumer of electricity in the world. Schemes like Deen Dayal Upadhyay Gram JyotiYojana (DDUGJY) and Integrated Power Development Scheme have been implemented for rural and urban areas.

• The Government had reduced the rates of the following• Raw materials for solar tempered glass BVD to 6%• Exempted Solar tempered glass BDC

• A new and restructured Central scheme with a focus on export infrastructure, namely, Trade Infrastructure for Export Scheme(TIES) will be launched in 2017-18

• The target to build 1 crore new homes should mandate usage of a 1KW solar system per home, as each of these homes will needpower. That itself will add 10GW of rooftop solar.

• Second phase of Solar Park development to be taken up for additional 20,000 MW capacity

46

UNION BUDGET---------------------------

2017-18Impact on Banking & Financial Sector

• Financial sector witnesssed a spur in the past year with Demonetisation playing the most Important role- Shri Arun Jaitley puts itas a strong potential to generate Long Term benefits in terms of reduced corruption ,greater digitisation of the economy

• JAM (JanDhan, Aadhar & Mobile) vision

• A Computer Emergency Response Team for our Financial Sector (CERT-Fin) will be established.

• Banks have targeted to introduce additional 10 lakh new PoS terminals by March 2017. They will be encouraged to introduce 20lakh Aadhar based PoS by September 2017. A move directed towards making India a cashless economy shall as a corollarywitness a growth of Financial Sector.

• Government will encourage SIDBI to refinance credit institutions which provide unsecured loans at reasonable interest rates toborrowers based on their transaction history.

• The draft billl to curtail menace of illicit deposit schemes has been placed in the public domain and will be introduced shortlyafter its Finalisation.

• The shares of Railway PSEs like IRCTC,IRFC and IRCON will be listed in stock exchanges.

• Listing and trading of Security receipts issued by a securitization company under SARFESI Act will be permitted in SEBIregistered stock exchanges.This will enhance capital flows into the securitization industry and will particulary be helpful to dealwith Bank NPAs.

• Other measures in the Financial Sector

• The commodities and securities derivative markets will be further integrated by integrating the participants, brokers, andoperational frameworks.

• The process of registration of financial market intermediaries like mutual funds, brokers, portfolio managers, etc. will be madefully online by SEBI. This will improve ease of doing business.

• A common application form for registration, opening of bank and demat accounts, and issue of PAN will be introduced forForeign Portfolio Investors (FPIs). SEBI, RBI and CBDT will jointly put in place the necessary systems and procedures. This willgreatly enhance operational flexibility and ease of access to Indian capital markets.

• Rs. 10,000 crores for recapitalization of banks to be provided by 2017-18.

47

UNION BUDGET---------------------------

2017-18Impact on Banking & Financial Sector

• Presently institutions such as banks and insurance companies are categorised as Qualified Institutional Buyers (QIBs) by SEBI.They are eligible for participation in IPOs with specifically earmarked allocations. It is now proposed to allow systemicallyimportant NBFCs regulated by RBI and above a certain net worth to be categorised as QIBs. This will strengthen the IPOmarket and channelize more investments.

• New ETF with diversified CPSE stocks and other Government holdings to be launched in 2017-18.

• Income tax amendments in the Financial Sector

• Investment made through specified FII’s is proposed to be outside the purview of indirect transfer provision applicable toshares and interest in entity (Section 9).

• Condition to maintain monthly average corpus fund in case of eligible off-shore investment fund would not apply to the year inwhich the fund is being wound up (Section 9A).

• Additional tax @ 10% on dividend would not be applicable to domestic company or a fund or institution. (Section 115BBDA).

• While calculating foreign tax credit against MAT/ AMT excess credit would be ignored and the period to carry forward theMAT/ AMT credit is proposed to be increased from 10 years to 15 years. (Section 115JAA & 115JD).

• It is proposed to provide the framework for computation of book profit for IND-AS compliant companies in the year ofadoption and thereafter (Section 115JB).

• Concessional TDS rate of 5% of income by way of interest from long term bond and loans from Indian Companies/ Governmentissued or borrowed on or after 1st July 2012 but before 1st July 2020 (Sections 194LC & 194LD).

• Restriction imposed on receipt of cash exceeding Rs. 3lakh from a person in a day for a single day transaction relating to oneevent or one occasion from a person. Penalty will be equivalent to amount so received in cash (Sections 269ST & 271DA ).

• Presumptive income 44ADwill be charged at reduced rate of 6% from 8% if all all transactions are done through bankingchannels (Section 44AD).

• Cash payment in excess of Rs. 10000 in a day otherwise than by banking channels would be disallowed as expense under thissection. Additionally it would not qualify benefit under section 35 AD and would not be eligible for depreciation as part ofcost of capex. (Section 40A(3).

48

UNION BUDGET---------------------------

2017-18Impact on Education Sector

• India has one of the largest networks of higher education institutions in the world. It is also the third largest in terms of educationenrollment per year.

• The Government of India has allowed 100% FDI in education sector through automatic route since 2002.

• Any amount credited or paid out of income of any university or educational institution to any trust or institutions registered undersection 12AA in the form of voluntary contribution made with a specific direction that they shall form part of the corpus of thetrust or institution shall not be treated as application of income to the objects for which such university or educational institutionis established.

• Launch SWAYAM platform with atleast 350 online courses enabling students to attend courses virtually taught by the best facultythrough DTH channels.

• Skill Acquisition and Knowledge Awareness for Livelihood Promotion Programme (SANKALP) is proposed to launch at a cost ofRs. 4000 crores to provide market relevant training to 3.5 crore youth.

• Establishing National Testing Agency as an autonomous and self sustained premier testing organization to conduct all entranceexaminations for higher educations in situations.

• India and Germany have signed an agreement on vocational education and skill development.

• Creation of additional 5000 post graduate seats per annum for structural transformation of the Regulatory framework of MedicalEducation and Practice in India.

• Establishing 100 India International Skill Centres across the county offering advanced training and courses in foreign language.

• Setup an innovation in secondary education with special focus on 3479 educationally backward blocks.

• Two New AIIMS will be opened in the state of Jharkhand and Gujarat.

49

UNION BUDGET---------------------------

2017-18

KOLKATA 501, Ashoka House, 3A Hare Street, Level – 5, Kolkata – 700 001

[email protected] +91-33-22317108 +91 98310 87579

BANGALORE Sri Lakshmi Plaza3rd Floor, No. 61, 7th Cross

[email protected] 24th Main, J.P. Nagar 2nd PhaseBengaluru- 560078 +91 97318 64646

CHENNAI Building No.1, 2nd Floor 1st Street, Balaji Nagar, Ekkaduthangal

[email protected] Chennai- 600 032 +91 90940 02280

MUMBAI Bharat Insurance Building,3rd Floor, 15A Horniman Circle, Fort,

[email protected] Mumbai – 400 001 +91 98211 62178

GURGAON 903-904, Tower – C, Unitech Business Zone, Nirvana Country, Sector – 50,

[email protected] Gurgaon – 122 018 +91 98365 43836






UNION BUDGET---------------------------

2017-18

direct tax proposals impact analysis of union budget 2017...

Documents