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Sunday 11 February 2018

Union Budget 2018-Key Takeaways

Individuals and salaried class
a.    Slab rates kept same.
b.    Education Cess and SHEC rates increased to 4% from existing 3%.
c.     Salaried assessee to avail a standard deduction of Rs.40,000/-
The standard deduction of Rs.40,000 replaces medical allowance of Rs 15,000 and transport allowance of Rs 1600 per month i.e. 19,200 per annum, the effective additional benefit on account of the standard deduction would be an additional income exemption of Rs 5,800.
Until AY 2018-19
From AY 2019-20
Gross Salary (in Rs.)
5,00, 000
(-) Transport Allowance
Not Applicable
(-) Medical Allowance
Not Applicable
(-) Standard Deduction
Not Applicable
Net Salary
For senior citizens
a.    Health insurance premium contribution in case of senior and very senior citizens extended to Rs. 50,000/- with corresponding amendment under section 80D.
b.    No TDS on interest from FD upto Rs 50,000.
c.     Quantum of deduction under section 80DDB for medical treatment in case of a senior citizen and very senior citizen increase from Rs. 60,000 and Rs.80,000 respectively to Rs. 1,00,000/-
a.    Reduction in corporate tax rate to 25% for companies having a turnover of Rs 250 crores and less
b.    Charitable / Religious Trusts claiming exemption under section 11 & 12 or under section 10(23C) for a business conducted by them will be needed to follow the provisions of section 40(a)(ia), 40A and 40A(3) i.e. TDS compliance to be ensured, Cash payments to restrict within limits of Rs. 10,000 only.
c.     Payment received on termination or modification of terms and conditions of a contract relating to business now to attract taxation.
d.    A businessman converting stock in trade into capital asset has to pay the tax on the appreciation.
e.    Number of amendments made in the Income Tax Act to give sanctity to the ICDS applicability like:
·         Marked to market losses as per ICDS to be permissible under section 36.
·         Foreign exchange difference in revenue items arising as per ICDS applicability to be recognised as profit or loss.
·         Insertion of section 43CB proposed to provide validity to the applicability of percentage completion method on construction contracts.
f.     Immovable property relating stamp duty valuations having impact under section 43CA, 50CA and 56(2)(x) relaxed to the extent of 5% difference of the consideration received or accruing as a result of transfer.
g.    Changes in income computation formula in case of truck and loading tempo operators under section 44AE for heavy goods vechile Rs.1000 per ton of gross vehicle weight formula on per month basis to be adopted and for other vehicle Rs.7500/- as old provision to continue.
h.    Reduction in scope of exemption claimable under section 54EC from any long-term capital asset to the long-term capital arising on account transfer of land or building or both only. Further the redemption period of bonds also proposed to be increased to 5 years.
i.      An employee leaving the job may be in receipt of any compensation or other payment from any person in connection with such termination or for the modification of terms and conditions of such employment shall be taxable for the same as income by way of other sources, amendment proposed under section 56.
j.      Certain amendments made under section 79, 115JB and 140 to acknowledge and provide relief in cases covered under the Insolvency and Bankruptcy Code 2016.
k.     Increase in scope of section 80IAC by modifying the definition of ‘eligible business’ as to include even start-up engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment or wealth creation. Further last dated of incorporation of business extended from 31.3.2019 to 31.03.2021.
l.      Relation of minimum number for days of employment of an employee to 240 days also relaxed to just 150 days in case of footwear or leather products even.
m.   New deduction section 80PA proposed to be inserted to provide 100% deduction to Producer Companies from eligible business being marketing of agricultural produce grown by the members or purchase of agricultural implements, seeds, livestock or other articles intended for agriculture or processing the agricultural produce of the members.
n.    Section 80TTB to be inserted to provide relief to senior citizens in respect of income arising in form of interest from banking company, cooperative society and post office to the extent of Rs. 50,000 for a financial year. However, in such case the benefit of section 80TTA shall not be available.
o.    Proposed insertion of section 112A to tax long term capital gain arising on account of transfer of listed shares and units of equity oriented mutual fund units @ 10% on an amount exceeding Rs. 1 lakh. However cost for such purposes prima-facie to take color from fair market value as on 31.01.2018.
p.    Dividend in the nature of section 2(22)(e) also to attract dividend distribution tax on company @ 30%.
q.    Alignment of dividend distribution tax rates on dividends distributed by various kinds of mutual funds under section 115R.
r.     Prima-facie adjustment under section 143(1) on account of mismatch between form 26AS and form 16 or 16A not to take place wef AY 2019-2020.
s.     New sub-section (3A) proposed to be inserted under section 143 to bring up an e-assessment procedure as per Budget Speech of Hon’ble Finance Minister.
t.     ICDS further strengthened by making necessary amendment in section 145A.
u.    New section 145B proposed to provide certain exceptions of taxation in certain special cases.

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