Finance Bill, 2018 highlights:
1. Tax rates for individuals, HUF and Firms unchanged.
2. It shall be mandatory to obtain PAN for all entities (including HUF other than individuals) and all directors, partners, members of such entities if the aggregate financial transactions done in a year by such entities amount to INR 2, 50,000 or more. Failure to do so will hold them liable to be prosecuted.
3.The domestic companies which have a total turnover or gross receipts not exceeding INR 250 crores in the financial year 2016-17 will be taxed at 25%. Currently, this cap is at INR 50 crores in financial year 2015-16.
4. A Health and Education Cess of 4% to replace existing 3% education cess on personal income tax and corporate tax.
5. Income Computation and Disclosure Standards:
i. ICDS is being given statutory backing.
ii. Profits or losses arising in foreign exchange in accordance with ICDS shall be allowed under new section 43AA.
iii. In accordance with ICDS, percentage completion method shall be applicable for computation of Construction Contract income. ICDS will also apply for valuation of inventory and securities.
6. Securities Transaction Tax to be paid with respect to long term capital gains will be 10% under Section 112A and such tax will also be liable for tax deduction at source. Further, long-term capital gains with respect to listed Securities Transaction Tax paid shares being withdrawn will be exempted under section 10(38).
7. Certain benefits which were currently provided such as transport allowance of INR 19,200 and Medical Reimbursement of INR 15, 000 are being withdrawn. Net benefit to salaries class shall be kept at INR 5, 800.
8. As per existing law, if the tax liability of a company after TDS was less than INR 3,000, filing tax return was not mandatory. It is proposed to now make it mandatory for all companies to file Income Tax return irrespective of their taxable income, failing which the companies will be liable for prosecution.
9. In the instance of failure to file financial return as required under section 285BA, penalty will be levied at an increased rate of INR 500 per day.
10. As per the existing Section 80AC of the Income Tax Act, unless income tax return is filed by the assessee on or before the due date (under Section 139(1)), deductions would are not admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE. It is now proposed in the budget to amend this provision to provide that with effect from April 1, 2018, the whole class of deductions under the heading ‘C—Deductions in respect of certain incomes’ in Chapter VIA shall not be allowed unless the return of income is filed by the due date.
11. Standard Deduction in case of salaried employees will be INR 40,000.
12. In the instances where stock in trade is converted to capital asset, the same shall be charged as business income in the year of conversion at a fair market value as on the date at which the conversion happens.
13. Taxation of deemed dividend shall be done as Dividend Distribution of tax at the rate of 30% in the hands of the company itself.