Income Tax Changes for FY 2017-18 (AY 2018-19)

Income Tax Changes

Get income tax changes of slab rate for the New financial year 2017-18 and assessment year 2018-19 in India. Also find home loan interest changes.

Income Tax Changes for FY 2017-18 (AY 2018-19)

Income Tax Changes

Restrictions on Cash Transactions

  • Limit for disallowance of business expenditure made in cash is reduced to Rs. 10,000 from Rs. 20,000 made to a person per day. (Limit of Rs. 35,000 for payment made to transporters however continues) Income Tax Changes for FY2K017-18
  • Above disallowance is lengthened on capital expenditure also by restricting depreciation and Capital Expenditure on R & D. Suppose, you have purchased a two-wheeler by paying Rs. 15,000 in cash and balance Rs. 30,000 in Cheque, Depreciation eligibility will be only on Rs. 30,000.
  • No deduction allowed for donation U/S 80G over Rs. 2,000 if paid in cash.
  • Prohibition for accepting loan other than by account payee cheque/draft/ECS over Rs. 20,000 continues U/S 269SS.
  • Prohibition for paying loan other than by an account payee cheque/draft/ECS over Rs. 20,000 continues U/S 269T.
  • With effect from 1st June 2015, above restrictions extended to acceptance of advance towards the sale of immovable property and repayment of such advance.

Restriction on Cash Receipts

  • No person shall receive Rs. 2 lakhs or more; per transaction or event/occasion or in total from a person in a day other than by an account payee cheque/draft/ECS as per section 269ST.
  • Penalty at 100% of the amount is involved.
  • Covers all cash receipts be it cash sales, advance for sales, lease advance, etc. (Loans received are not included since they are covered by section 269SS where the restriction is up to Rs. 20,000 only).
  • Following cash transactions amount to the violation of section 269ST attracting penalty.

Accepting cash more than or equal to Rs. 2 lakhs.

Instance

In a day per person

If you receive Rs. 70,000 each against 5 invoices from same customer on one single date.

Against one bill per person

If you collect against one bill of Rs. 4 lakhs at Rs. 20,000 on 20 different days.

Against one event or occasion per person

If you collect Rs. 1 lakh on one day and Rs. 1.5 lakh on another day towards lease deposit.

Any cash is deposited directly into your bank accounts by others including customers of Rs. 2 lakhs or more in a day or with respect to a single transaction or event or occasion would also amount to violation.

Restrictions on House Property Loss

  • House property loss can be set off against other head of income only up to Rs. 2 lakhs in the same year, balance loss has to be carried forward to 8 AY for set off against house property only.

Particulars

 

FY 2016-17

Particulars

 

FY 2017-18

Business Income

5,00,000

Business Income

5,00,000

Rental Income

60,000

Rental Income

60,000

Interest on Home Loan

(4,50,000)

(3,90,000)

Interest on Home Loan

(4,50,000)

(2,00,000)

Net income

1,10,000

Net income

3,00,000

Loss c/f

1,90,000

  • No notional income from House property held as stock-in-trade for the period up to 1 year from the end of the FY in which the completion certificate of construction of property is obtained from the competent authority. E.g., A Developers completes construction of 5 Flats on 1st April 2017, gets a completion certificate from BBMP and the flats remains unsold, then tax treatment would be as under:

FY 2017-18

FY 2018-19

FY 2019-20

No tax on notional income

No tax on notional income

Tax based on fair rent

Changes in Capital Gains

  • In case of immovable properties, holding period is reduced from 36 months to 24 months to qualify as long-term capital asset. (note that other capital assets such as jewelry, holding period should be three years for claiming long-term)

Particulars

Earlier treatment

Post Amendment Treatment

Sold on 16th April, 2017

90,00,000

90,00,000

Purchased on 16th January, 2015

60,00,000

60,00,000

Indexed cost

NA

68,57,143

Capital Gain

30,00,000 (short-term)

21,42,857 (long-term)

Tax amount

7,46,750

4,41,428

Reinvestment option U/S 54 & 54EC

Not available

Available

  • Joint Development Agreements will be liable to tax in the year of receipt of a certificate of completion in the hands of the individual or HUF.
  • In case asset sold before the issue of the certificate by competent authority capital gains tax should be charged in the year in which such transfer takes place.
  • TDS @ 10% would attract payments made under JDA.
  • Income Tax Changes 2018

JD Agreement entered on

30/04/2017     (FY 2017-18)

Construction work completed

31/12/2018     (FY 2018-19)

Completion certificate from BBMP obtained on

30/04/2019     (FY 2019-20)

Capital gains taxable for the FY

2019-20

  • Shift in the base year from 1981 to 2001 for calculation of capital gains. That is for assets purchased before 1st April 2001 indexation benefit will be available on cost or FMV whichever is higher as on 1st April 2001.
  • Tax exemption will be available on reinvestment of capital gains in any other notified redeemable bonds (in addition to investment in NHAI and REC).
  • However maximum amount that can be invested remains Rs. 50 lakhs.
  • Exemption of long-term capital gain on sale of listed company shares through a stock exchange if STT is paid is amended, that such shares got on or after 1st October 2004, an exemption will be available only if STT is paid at the time of acquisition. Also, a list is expected to be notified soon.
  • On must establish that either shares were purchased before 1st October 2004 or present evidence that STT was paid at the time of purchase.
  • Fair Market Value (FMV) deemed to be the full value of the consideration for arriving at Capital Gains where consideration for the transfer of unquoted company is lower than FMV of such shares. E.g., A sells one share of face value Rs. 100 at Rs. 100 per share (FMV of shares is Rs. 120) to B. Therefore, tax treatment in the hands of;

Income Tax Changes after GST

Seller A

 Purchaser B

Rs. 20 taxable under Capital Gains (FMV Rs. 120-cost of acquisition Rs. 100)

Rs. 20 taxable under Income from Other Sources (FMV Rs. 120-purchase price Rs. 100)

Income Tax Changes calculated according to the income tax slabs

Cap on Depreciation

CBDT issued a notification on 7th March 2017 requiring cap on depreciation rates as under:

  • The highest rate of depreciation has been restricted to 40% w.e.f. FY 2017-18. An impact can be understood as under:

Asset

Depreciation Rate FY 2016-17

Depreciation Rate FY 2017-18

Computer, laptops, softwares, etc.

60%

40%

Renewable energy devices, etc.

80%

40%

Air Pollution Control Equipments, etc.

100%

40%

Income from other sources

  • Dividend Accepted from Domestic Companies by all resident taxpayers (other than dividend received by Domestic Companies and Charitable Trusts) over Rs. 10 lakhs chargeable to tax at 10% in the hands of the receiver.
  • Disallowance of expense such as rent, interest, etc. is extended to ‘Income from Other Sources’ also if TDS is not deducted from payments made to residents. E.g. Ravi Enterprises earns interest income of Rs. 1 lakh under income from other sources and incurs an expenditure of Rs. 60,000 towards interest paid. In case Ravi Enterprise does not deduct TDS on the interest paid of Rs 60,000, 30% of Rs. 60,000=Rs. 18,000 will be disallowed expenditure.

Income Tax Changes for final year

Tax incentive for Employment Generation

Nature of Deduction

Eligible assesses

Condition for claiming deduction

Deduction of 30% of the additional employee cost is allowed for 3 AY from AY 2017-18.

 

Additional employment cost means salary and other payments made to additional (new) employees.

 

(the deduction is in addition to the employee cost allowed under the Income Tax)

– The Assesse has income from Business.

 

– And is subject to Tax audit U/S 44AB.

 

– CA Certificate to be submitted in Form 10DA.

Eligible additional/new employees:

a) The salary of the employees is less than or equal to Rs. 25,000.

b) Employed for a period of at least 240 days in a year (180 days in case of manufacture of apparel business).

c) Employee should participate in the recognized PF.

 

In case of existing businesses:

a) The new employees are lower of;

i) New joinees during the year

ii) Increase in the total no. of employees as on PY end & CY end.

b) The payments are made only by way of a/c payee cheque/draft or electronic transfers.

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