budget 2017 highlights

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Budget 2017

Foreword

of 23Private & Confidential

Union Budget presented by Finance Minister on 1st February, 2017 has broken the age old practices with

following changes:

• Budget has been advanced to 1st February to enable various ministries to operationalise all activities

from commencement of financial year i.e. 1st April itself

• Railway Budget has been merged with General Budget and thus the colonial practice prevalent since

1924 has been done away with.

• Classification of expenditure as plan and non plan has been done away with and the budget allocations

are only divided into capital and revenue expenditure.

Finance Minister has kept the theme of the budget as “Transform, Energise and Clean India” that is, TEC

India. Budget has taken several measures to achieve the Government's aim to curb black-money. Focus

has also been placed on growth schemes in rural areas and steps been taken in digitizing the economy.

This Budget has brought tax relief for individual assessee and domestic companies having turnover upto

INR 50 Crores. Further it has also cleared the air over applicability of indirect transfer provisions to

Foreign Portfolio Investors (FPIs) (category I and II) with retrospective effect from 1st April 2012. It is also

proposed to abolish Foreign Investment Promotion Board (FIPB) and further liberalise the foreign direct

investment (FDI).

In all it can be said that this budget is focused, target oriented and prepared keeping in mind the long

term vision for the Indian economy.

Budget Key Highlights

Economic Indicators

Direct Tax

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Budget 2017 – Presentation Outline


Indirect Tax

Policy Changes

Private & Confidential

Tax Proposals – Tax Savings

Rate of Tax for individuals/HUF/BOI/AOP having income between Rs.2.5

Lakh- Rs.5 Lakh reduced to 5% from 10%.

Rate of Tax for smaller companies, having annual turnover up to Rs.50

Crores in financial year 2015-16, has been reduced to 25% from 30%.

Rate of presumptive income for taxpayers, having turnover up to Rs.2

Crores, has been reduced to 6% from 8% in respect of turnover received

by Non-cash means.

Change in existing provision to provide for non deduction of TDS U/s 194D

on commission payable to individual insurance agents subject to filing of

self declaration.

Period for concessional withholding rate of 5% on interest earned by

foreign entities in ECB or Bonds/Securities has been extended from

30.06.2017 to 30.06.2020. This benefit is also extended to Rupee

denominated (Masala) Bonds.

Provision of concessional tax rate of 10% per cent in case of income

arising from sale of carbon credits.

Increase in the period of carry forward of MAT Credit from 10 years to 15

years.

Budget 2017 – Key Highlights



Rebate u/s 87A has been reduced to Rs.2,500/- from Rs.5,000/-. Further

rebate shall only be available to resident individuals whose total income

does not exceed Rs.3,50,000/-.

Limit of cash payments for both revenue and capital expenditure, has

been reduced to Rs.10,000/- from Rs.20,000/- to a person in a day.

It is proposed to levy a surcharge of 10% of tax payable on

individuals/HUFs/AOP/BOI whose taxable income is between Rs.50 lakhs

and Rs.1 Crore. The existing surcharge of 15% of tax on people earning

more than Rs.1 Crore will continue.

The limit of cash donation which can be received by a charitable trust is

being reduced from Rs.10,000/- to Rs.2,000/- from one person.

The government has accepted the suggestion of SIT (Black Money) that no

transaction above Rs.3 lakh would be permitted in cash.

The maximum amount of cash donation that a political party can receive

from one person has been capped at Rs.2,000/-. However, parties will be

entitled to receive donations by cheque or digital modes of any amount

from their donors.

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Tax Proposals –Tax Enhancement



The threshold limit for audit of business entities who can opt for

presumptive income scheme has been increased from Rs.1 Crore to Rs.2

Crore.

Professionals opting for presumptive taxation (available for earning upto

Rs.50 Lacs) can pay advance tax in one instalment in March instead of

four instalments at present.

The threshold turnover limit for maintenance of books for individuals

and HUF increased from 10 Lakhs to 25 Lakhs and income limit increased

from 1.2 Lakhs to 2.5 Lakhs

The time limit for revision of income tax return has been reduced to 12

months from completion of financial year.

The base year of indexation for calculating capital gains has been shifted

from 01.04.1981 to 01.04.2001 for all class of assets including

immovable property.

The holding period for considering gain from immovable property as

long term has been reduced from 3 to 2 years.

It is proposed to extend the basket of financial instruments in which

capital gains can be invested without payment of tax.

Other Tax Proposals


Economic Indicators


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Economic Indicators

Direct Tax

Indirect Tax

Policy Changes


CPI inflation declined from 6% in July 2016 to 3.4% in December 2016 and

is expected to remain within range of 2% to 6%.

Foreign Exchange reserves have reached 361 Billion US Dollars as on 20th

January, 2017.

War against Black money launched in India through consistent steps taken

by Government of India including through the amendment proposed in

Budget 2017.

Economic Indicators

Indian Economy

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The total expenditure for 2017-18 has been budgeted at Rs.21.47 lakh

Crores. With the abolition of Plan/Non Plan Classification, the focus is

now on Revenue and Capital Expenditure.

Fiscal Deficit target is kept at 3.2 per cent of GDP in FY 2017-18.

Revenue Deficit target is kept at 1.9 per cent of GDP in FY 2017-18.

Fiscal Management


Demonetisation was a bold and decisive measure taken by the government

to curb tax evasion and parallel economy.

This exercise was a part of Government’s resolve to fight corruption, black

money, counterfeit currency and terror funding.

This move is expected to generate long term benefits in terms of reduced

corruption, greater digitisation of the economy, increased flow of financial

savings and block terror funding.

Economic Indicators

Demonetisation

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The GST Council has finalized its recommendations on almost all the

issues based on consensus on the basis of 9 meetings held.

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.

Goods and Services Tax (GST)



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Indirect Tax

Policy Changes

Direct Tax

Direct Tax

Economic Indicators


Direct Taxes

Individual Tax Payers

(Till 60 Years of Age)

Senior Citizens

(60 to 80 Years of Age)

Senior Citizens

(80 Years and above)

Income Tax Rate

Upto 2,50,000 Exempt

2,50,001 to 5,00,000 5%

5,00,001 to 10,00,000 20%

Above 10 Lacs 30%

Income Tax Rate


3,00,001 to 5,00,000 5%

5,00,001 to 10,00,000 20%

Above 10 Lacs 30%

Income Tax Rate


5,00,001 to 10,00,000 20%

Above 10 Lacs 30%

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Individual

Tax Rates


Existing rate of taxation for individual/HUF/AOP/BOI assesses between income of 2.5

lakhs to Rs.5 lakhs reduced to 5% from the present rate of 10%

Rebate u/s 87A has been reduced to Rs.2,500/- and rebate shall be available to

resident individuals whose total income does not exceed Rs.3,50,000/-.

Surcharge of 10% of tax payable on categories of individuals whose annual taxable

income is between Rs.50 Lakhs and Rs.1crore

In order to make MSME companies more viable, tax rate for companies having

turnover up to Rs.50 Crore in financial year 2015-16 is reduced to 25%.

Transaction above Rs.3 lakh would not be permitted in cash subject to certain

exemptions provided for U/s 269ST. Provision have been made U/s 271DA for levying

equivalent penalty on the recipient in case of contravention.

Individual or HUF (not liable for tax audit), will be required to deduct TDS @ 5% for

rental payments exceeding Rs.50,000/- per month U/s 194-IB w.e.f. 1st June 2017.

In case Indian company or PE of a foreign company in India pays interest exceeding

rupees one crore than the interest amount in excess of 30% of EBITDA shall not be

allowed as deduction. The interest disallowed can be carried forward and set off for

eight Assessment years.

Current year loss under the head “Income from house property” from Interest on

housing loans which can be set off against income under any other head has been up

capped to Rs.2 lakhs only. The loss not so set off can be carried forward for next

eight assessment years.

Direct Taxes

Important Changes


Commission payable to individual insurance agents exempt from the requirement of

TDS subject to their filing a self-declaration that their income is below taxable limit

Scope of domestic transfer pricing restricted to cases where one of the entities

involved in related party transaction enjoys specified profit-linked deduction

MAT credit is allowed to be carried forward up to a period of 15 years instead of 10

years at present

Allowable provision for Non-Performing Asset of Banks increased from 7.5% to 8.5%.

Interest has been made taxable on actual receipt basis instead of accrual basis in

respect of NPA accounts for all non-scheduled cooperative banks at par with

scheduled banks.

Under scheme of presumptive income for small and medium tax payers whose

turnover is up to 2 crores, the present tax rate of 8% of turnover which is counted as

presumptive income is reduced to 6% in respect of turnover which is by non-cash

means.

Under scheme for presumptive taxation for professionals with receipt up to 50lakhs

per annum advance tax can be paid in one instalment in March instead of four.

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. Also time limit for

completion of scrutiny assessments is being 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.

Direct Taxes

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Important Changes


Trusts

Donation by an entity registered u/s 12A or approved u/s 10(23C) to other entity

registered u/s 12A with the direction that such donation shall form part of the

corpus, shall not be treated as application of income for charitable purposes.

If a trust or an institution, which has been granted registration, and, has adopted or

undertaken modification of the objects subsequently which do not conform to the

conditions of registration, shall be required to obtain fresh registration.

Direct Taxes

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Provisions of section 115BBDA extended to provide for tax @10% on dividend income

exceeding 10Lakh to all persons except domestic companies or trust or institution

or fund registered u/s 12AA or 10(23C).

Dividend

In order to align the transfer pricing provisions with the OECD transfer pricing

guidelines and international best practices, it is proposed to insert a new section to

provide that the assessee shall make secondary adjustment where the primary

adjustment to the transfer price has been made in certain cases. The provision shall

apply if the primary adjustment exceeds one crore rupees and the excess price

attributable to the adjustment is not brought to India within the prescribed time.

Transfer Pricing


Reduction in the holding period for computing long term capital gains from transfer

of immovable property from 3 years to 2 years.

Base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all

classes of assets including immovable property.

Transfer of unquoted equity shares, where the FMV is less than the consideration

received, FMV shall be deemed to be the sale consideration for the purpose of

computation of Capital Gains.

Foreign Portfolio Investor (FPI) Category I & II exempted from indirect transfer

provision. Indirect transfer provision shall not apply in case of redemption of shares

or interests outside India as a result of or arising out of redemption or sale of

investment in India which is chargeable to tax in India.

It is proposed to exempt capital gains arising out of transfer of a rupee denominated

bond by a non-resident to a non-resident.

Exemption from LTCG in case of transfer of listed shares shall be available if security

transaction tax has been paid at the time of acquisition of such shares where they

have been acquired after 1st October, 2004.

Capital Gains

Direct Taxes


Others

It is proposed to amend the provisions relating to computation of book profit for the

purpose of levy of minimum alternate tax (MAT) so as to take into consideration the

impact of Ind-AS on the financial statements of companies.

Capital asset referred to in section 35AD is used for an ineligible business and the

benefit of said section is withdrawn, the actual cost to the assessee in respect of

such asset shall be the actual cost to the assessee, as reduced by an amount equal

to the amount of depreciation.

It is proposed to do away with the provisions enabling the Assessing Officer not to

process the return and thus withhold the refund in cases where the return is

selected for scrutiny till the completion of assessment. It is however proposed that

in cases where grant of refund is likely to adversely affect the interest of revenue, it

can be withheld with the approval of the higher authority after recording the

reasons in writing.

Section 194J will be amended to reduce the rate of deduction of tax from 10% to 2%

in case of payments made to a person engaged only in the business of operation of

call centre.

From AY 2018-19 If return not filed as per Sec. 139 (1), late fee of Rs. 5000 for delay

up to 31st December and Rs.10000 thereafter has been proposed. (Section 234F).

It is proposed to authorise the Central Board of Direct Taxes (CBDT), to issue

directions or instructions in order to remove hardships faced by the taxpayers in

connection with imposition of penalty relating to TDS or TCS

Direct Taxes


Indirect Tax


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Indirect Tax

Direct Tax


Policy Changes

Economic Indicators


No change in peak rate of Basic Customs Duty (“BCD”).

Following changes are made in the rates of duty of specific items:

Indirect Taxes

Customs Duty

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Name of Item Tax Change

LNG BCD reduced from

5% to 2.5%

Miniaturised POS card reader for m-POS, micro ATM standards

version 1.5.1, Finger Print Readers/Scanners and IRIS Scanners

including part and components for manufacturing of these items

BCD, Excise/CV

Duty and SAD

exempt

Populated printed circuit boards (PCBs) used for making mobile

phones

Additional SAD @

2% is imposed

Silver medallion, silver coins, having silver content not below

99.9%, semi-manufactured form of silver and articles of silver

CVD @ 12.5% is

imposed

Medium Quality Terephthalic Acid (MTA, Qualified Terephthalic

Acid (QTA),

BCD reduced to 5%

from 7.50%

Cashew nut, Roasted, Salted or roasted and salted. BCD increased to

45% from 30%

Vegetable tanning extracts, namely, Wattle extract, Myrobalan

fruit extracts

BCD reduced to

2.50% from 7.50%


Indirect Taxes

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Excise Duty

Name of Item Tax Change

All items of machinery required for balance systems operating onbiogas/bio-methane/by-product hydrogen.

Reduced from12.50% to 6%

Membrane sheet and Tricot/Spacer for use in the manufacture ofRO membrane element for household type filters

Reduced from12.50% to 6%

Miniaturised POS card reader for m-POS, micro ATM standards

version 1.5.1, Finger Print Readers/Scanners and IRIS Scannersincluding part and components for manufacturing of these items

Exempt

Silver medallion, silver coins, having silver content not below99.9%, semi-manufactured form of silver and articles of silver

CVD @ 12.5% isimposed

The standard rate of Excise duty is maintained at 12.5%. Following changes are made

in the rates of duty of specific items:

Service Tax

Standard rate of Service tax is maintained at 15% (inclusive of SBC and KKC).

It is proposed to amend the Rule 2A of service tax with retrospective effect from

01.07.2010 so as to make it clear that value of service portion in execution of works

contract involving transfer of goods and land or undivided share of land, as the case

may be, shall not include value of property in such land or undivided share of land.


Indirect Taxes

Service tax is proposed to be exempted on following :

• Service provided or agreed to be provided by the Army, Naval and Air force group

Insurance funds by way of life insurance to members of the Army, Navy and Air force

under the group insurance schemes of the central government with retrospective

effect from 10.07.2004.

• The one time upfront amount (called as premium, salami cost, price, development

charges or by whatever name) payable for grant of long-term lease of industrial

plots (30 years or more) by State Government Industrial Development

corporations/undertakings to industrial units with retrospective effect from

01.06.2007.

The exemption in respect of services provided by IIMs by way of two year full time

residential post graduate programmes (PGP) in management for the post Graduate

Diploma in Management(PGDM), to which admissions are made on the basis of CAT,

is being extended to include Non-Residential Programmes also.

Service by way of ‘carrying out any process amounting to manufacture or production

of goods excluding alcohal liquor for human consumption’ is proposed to be deleted

from negative list and to be included in Exemption Notification.

R&D Cess which is payable on all the payments made towards bringing technology,

drawings, designs, publication, special service, or technical persons into India from

a place outside India. It was presently levied at the rate of 5 % and is proposed to

be repealed effective 1st April 2017

Service Tax


Policy Changes


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Policy Changes

Direct Tax


Economic Indicators

Indirect Tax


FIPB has successfully implemented e-filing and online processing of FDI applications.

Currently more than 90% of the total FDI inflows are now through the automatic route.

In view of this from 2017-18 it is decided to abolish FIPB and the roadmap for the same

will be announced soon.

Further liberalisation of the FDI policy is under consideration and necessary

announcement will be made soon.

Finance Minister announced that the Government would bring in legislation to deal with

economic offenders who fled the country. The new law would provide for the

confiscation of assets of economic offenders who keep evading the law by escaping to

foreign countries. This move would come as a major relief for enforcement agencies to

recover the same by confiscating assets.

The Government is considering the option of amending the Negotiable Instruments Act

suitably to ensure that the payees of dishonored cheques are able to realise the

payments.

With a view to strengthen the digital transactions in India, the Government is also

proposing to create a Payments Regulatory Board in the Reserve Bank of India by

replacing the existing Board for Regulation and Supervision of Payment and Settlement

Systems.

Policy Changes


Gurgaon

Email : [email protected] Website : www.snr.net.in

No 605, 2nd Floor, 62nd Cross,

5th Block Rajajinagar, Bangalore,

Karnataka- 560010 (India)

Tel. +91 80 42064178

110, Plot No. 56,

Institutional Area, Sector - 44,

Gurgaon – 122002, Haryana (India)

Ph: +91 124 4534650

BangalorePune

Office No. 5,Kalashree Apartment,

Opposite Bank of Maharashtra,

Karve Road,

Pune 411004 (India)

Ph: +91 20 25435788

A-15, Second Floor, Hauz Khas,

New Delhi- 110016(India)

Tel. +91 11 26856421, 41655801, 26855884,

Fax: +91 11 26567540

Head Office - Delhi

Locations

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For any clarification or further information:

Please contact:

Dinesh Singhal

Partner - Tax & Regulatory

[email protected]


mailto:[email protected]

budget 2017 highlights

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