We here present you the Key highlights of the tax proposals of Modi government’s fifth and last full Budget  for the year 2018-19 presented in the Parliament by Sri Arun Jaitley, Minister of Finance and Corporate Affairs, Government of India.

TAX PROPOSALS

1. No change in the structure of the income tax rates for individuals.
2. For Salaried taxpayers, a standard deduction of Rs. 40,000/- in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the transport allowance at enhanced rate shall continue to be available to differently- abled persons and other medical reimbursement benefits in case of hospitalization etc., for all employees shall continue.
3. Relief incentives for senior citizens

• Exemption for Interest income on deposits, from all fixed deposits schemes and recurring deposit schemes with banks and post offices to be increased from Rs.. 10,000/- to Rs.. 50,000/- and No TDS shall be deducted on such income, under section 194A.
• Deduction for health insurance premium and medical expenditure, limit raised from Rs.. 30,000/- to Rs. 50,000/-, under section 80D.
• Deduction for medical expenditure in respect of certain critical illness, limit raised from, Rs. 60,000/- in case of senior citizens and from Rs. 80,000/- in case of very senior citizens, to Rs. 1 lakh in respect of all senior citizens, under section 80DDB.
• Extra tax benefit of Rs. 4,000 crores to senior citizens in addition to tax concessions
• To extend the Pradhan Mantri Vaya Vandana Yojana up to March, 2020 for an assured return of 8% is given by Life Insurance Corporation of India. The existing limit on investment of Rs. 7.5 lakh per senior citizen under this scheme is also being enhanced to Rs. 15 lakh.

  4. Exempt transfer of derivatives and certain securities by Non-residents from capital gains tax. Non-corporate taxpayers operating in International Financial Services Centre (IFSC) shall be charged Alternate Minimum Tax (AMT) at concessional rate of 9% at par with Minimum Alternate Tax (MAT) applicable for corporates.

5. The income of trusts and institutions is exempt if they utilize their income towards their objects in accordance with the relevant provisions of the Income-tax Act. However, there is no restriction on these entities for incurring expenditure in cash. In order to have audit trail of the expenses incurred by these entities, it is proposed that payments exceeding Rs. 10,000/- in cash made by such entities shall be disallowed and the same shall be subject to tax. In case of non-deduction of tax, 30% of the amount shall be disallowed and the same shall be taxed.

6. Long Term Capital Gain exemption u/s 10(38) in respect of listed securities transaction tax paid shares being withdrawn

7. Tax long term capital gains exceeding Rs. 1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31^st January, 2018 will be grandfathered as cost of acquisition will be taken as Fair market Value as on 31^st January, 2018.

8. Introduced a tax on income distributed by equity oriented mutual fund at the rate of 10%.

9. Education Cess existing at 3% will be replaced by 4% to be known as “Health and Education Cess” to be levied on the tax payable.

10. Provisions of MAT shall not apply in respect of foreign companies having income solely from businesses referred u/s 44B, 44BB, 44BBA and 44BBB of the Act provided such income has been offered to tax at the rates specified in these sections.

11. Rationalize the provisions u/s 56(2)(x) of the Act, provide the receipt of any property by a wholly-owned Indian subsidiary from its holding company and by an Indian holding company from its subsidiary shall be exempt from tax.

12. Trading in agricultural commodity derivatives on a recognized stock exchange shall not be treated as a speculative transaction u/s 43(5) even if no Commodities Transaction Tax (CTT) has been paid in respect of those derivative transactions.

13. It’s proposed that income arising to a non-resident from royalty or fees for technical services received from National Technical Research Organization shall be exempt from tax.

14. It’s proposed that no expenditure or allowance / set off of any loss shall be allowed in respect of Undisclosed income determined by the Assessing Officer under section 115BBE of the Act.

15. Every entity, not being an individual, which enters into any financial transaction of an amount aggregating to Rs. .2.50 Lakh or more in a financial year shall be required to apply for a permanent account number (PAN). It is also proposed that directors, partners, principal officers, office bearer or any person competent to act on behalf of such entities shall also apply for PAN.

16.It’s proposed to mandate that in order to avail benefit of any deduction under Chapter VIA-C, the persons have to file return within due date specified under section 139(1) of the Act.

17.When stock-in-trade is converted into capital asset, the fair market value of the same on the date of conversion shall be taken into account for computing business income.

18.In respect of heavy goods vehicles (more than 12 tonnes), the presumptive income u/s 44AE of the Act shall be computed at the rate of Rs. 1000 per tonne per month.

19.In order to provide statutory backing and certainty to Income Computation and Disclosure Standards (ICDS), it is proposed to amend the provisions of Chapter IV-D of the Act relating to computation of business income and Chapter XIV of the Act.

20. TDS at the applicable rate shall be made in respect of interest exceeding Rs.. 10,000 from newly introduced 7.75% GOI Savings (Taxable) Bonds, 2018.

21. In case of an amalgamated company, accumulated profits for the purpose of determining dividend shall also include the accumulated profits of the amalgamating company on the date of amalgamation.

22. Deemed dividend u/s 2(22)(e) of the Act shall be subject to dividend distribution tax at the rate of 30% without grossing up.

23. Concessional tax rate of 25% for new domestic companies engaged in manufacturing shall be subject to the special rates in respect of specified income provided under Chapter XII of the Act.

24. Government had liberalized the presumptive income scheme for small traders and entrepreneurs with annual turnover of less than Rs. 2 crores and introduced a similar scheme for professionals with annual turnover of less than Rs. 50 lakhs with the hope that there would be significant increase in compliance.