08 Mar Major Direct Tax Proposals- Budget 2018
Tax on the Long-term capital gain(LTCG)
LTCG from the transfer of listed shares or units of equity oriented fund or units of business trust in excess of Rs 1,00,000 shall be taxable at the rate of 10%. However, the amount of capital gain earned up to 31st January 2018 shall be grandfathered i.e. the same shall be exempt. Earlier, LTCG from the transfer of listed shares or units of equity oriented fund or units of business trust was fully exempt under section 112 of the Income Tax Act,1961. There was a large amount of exempted capital gain from listed shares and units as per the return filed for AY 17-18. A major part of this gain has accrued to corporates & LLP. This has created a bias against manufacturing, leading to more business surpluses being invested in financial assets. This move will bring Rs 20,000 cr in the first year. A new section 112A has been notified for taxing LTCG on said instruments
Relief to salaried taxpayers
A standard deduction of Rs 40,000 in lieu of existing exemption in respect of transport allowance and medical reimbursement to salaried taxpayers. This deduction is available to pensioners as well. Earlier, the amount of exemption was Rs.19,200 and Rs 15,000 towards transport allowance and medical allowance respectively under section 10 of the Income Tax Act 1961. This move will significantly benefit the pensioners as they did not enjoy any allowance towards transport and medical expenses.
Relief to Senior Citizen
Deduction of Rs 50,000 in respect of interest income earned on deposits with banks and post offices is proposed. A new section 80TTB is proposed to inserted for same. Further, there shall be no deduction of tax on the source on such income under section 194A. Prior to amendment, the amount of deduction of Rs. 10,000 in respect of interest income on saving deposits was allowed under section 80TTA and that will continue to be allowed to persons other than those who will be claiming deduction under the newly proposed section 80TTB of the Income Tax Act, 1961. This move will result in savings of tax thus more earning, helping senior citizen to live a dignified life.
Under section 80D of the Income Tax Act, 1961, the amount of deduction available in respect of premium paid to keep in force medical insurance has increased to Rs. 50,000 from Rs.30,000 to senior citizen.
Under section 80DDB of the Income Tax Act, 1961-deduction up to Rs. 100,000 deduction allowed to all senior citizens in respect of medical expenses incurred for the specified disease. Earlier, Rs.60,000 and Rs.80,000 was allowed as a deduction under section 80DDB to senior citizen (age of 60 years or more) and very senior citizen(age of 80 years or more) respectively
Health and Education Cess
Health and Education Cess at the rate of 4% to replace existing Education Cess and Secondary and Higher Education Cess. Education cess at the rate of 2% and Secondary and Higher Education cess at the rate of 1% was applicable. Therefore, total cess of 3% was applicable. This move will enable the government to collect an estimated additional amount of Rs.11,000 cr which will help to improve medical facilities in our nation.
Assessments to be done in electronic mode. There was no such provision for e-assessment. This move will eliminate person to person contact leading to greater efficiency and transparency.
Dividend distribution tax(DDT) Deemed dividend under section 2(22)(e)
Loans and advances in the nature of deemed dividend referred to under section 2(22)(e) shall be subject to dividend distribution tax at the rate of 30% without grossing up.
Tax Rate for domestic companies
New Domestic companies engaged in manufacturing shall be taxed at the rate of 25% with turnover up to Rs.250 crore during FY 2016-17. Earlier, tax rate of 25% was applicable for companies with turnover up to Rs.50 crore. The lower corporate tax will leave them with an investible surplus which in turn will create more jobs and overall development.
Measure to control cash economy
Cash expenditure made by trust and institutions in excess of Rs.10,000 shall be disallowed, else 30% of such expenditure will be disallowed. This is a measure to control cash expenditure and to have an audit trail of the expenses.
Alternate Minimum Tax
Alternate Minimum Tax(AMT) at the rate of 9% will be charged to non-corporate taxpayer operating in International Financial Service Centre(IFSC). No such concessional rate of AMT was applicable. MAT at the rate of 9% was already made applicable for corporate taxpayers operating in International Financial Service Centre through Finance Act-2017. This is one of the tax incentives as the government is looking forward to developing a world-class international financial services center in India.