02 April, 2017

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Do You Know What Has Changed in Income Tax w.e.f 1st April, 2017 ?

CHANGES IN INCOME TAX LAW THAT WILL COME INTO EFFECT FROM 1-4-2017


With the Coming Financial Year Brace Yourself up for many changes in Income Tax Laws in India. A Lot of them focused on encouraging digital transactions and definitive attempt to curb cash transactions. Limits of Cash Transactions are reducing, the rate of income tax (deemed) for small assesses receiving considerations in non cash modus shall be reduced to 6% from existing 8% and several other. Some of the highlights of changes are as under:-

(1) Limit for payment of expenses by cash (both, capital and revenue expenditure) reduced from Rs. 20,000 to Rs. 10,000 per day in aggregate per person. Capital expenses paid in cash beyond the said limit will not be taken into account for depreciation purposes. However, the cash payment limit for lorry freight etc. remains the same at Rs. 35,000.  [section 40A (3)]

(2) No person shall receive an amount of
two lakh rupees or more, by cash (Sec. 269 ST) :

(a) in aggregate from a person in a day; or
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion.

The penalty for violation of above is to be a sum equal to the amount of such receipt.

In view of the newly introduced above said penal provisions relating to cash sales, the existing provisions (in vogue from 1.6.2016) relating to collection of TCS @ 1% on cash sales exceeding Rs.2 lakhs (Rs.5 lakhs, in the case of jewellery) are deleted. Consequently, there is no need to collect TCS on cash sales exceeding Rs.2 lakhs. Straight away it will attract equal amount penalty now.


(3)    For below Rs. 2 crores turnover cases –  (section 44 AD)

-For Non Cash Sales (through Digital, Online, cheque, Bank etc.) : Net Profit will be taken as
6% of Turnover/Gross Receipt.

-For Cash Sales: Net Profit will be taken as 8% of Turnover/Gross Receipt.


(4)      Tax Exemption limit is Rs. 2,50,000/- (same as earlier) –

         - After that, upto Rs. 5 lakhs, Tax Rate is 5% (earlier it was 10%). Tax rebate of maximum Rs. 2,500 will be allowed, for total income upto  Rs. 3.50 lakhs.

-Individuals having total income exceeding Rs. 50 lakhs but below Rs. 1 crore, are to pay surcharge @ 10% of the tax. Those having total income exceeding Rs. 1 crore shall continue to pay surcharge @ 15%.

(5)     Payment of Rent - Rs. 50,000 per month by any Individual or HUF (not subject to Tax Audit requirements) - deduct TDS @ 5%.


 (6) Capital Gain in respect of Land & Buildings –

– Periodicity for long term Capital Gain is reduced from 3 years to 2 years.


– Base year shifted from 01.04.1981 to 01.04.2001 for all assets including Immovable property.

(7) Corporate tax rate for the account year 2017-18 for companies with annual turnover upto Rs. 50 crores (in the account year 2015-16) is reduced to 25%. No change in firm tax rate of 30%.

(8) Donations made exceeding Rs. 2000 will be not be eligible for deduction   under section 80G, unless these are made using modes other than cash. Consequently, trusts accepting 80G donations may advise their donors to give donations exceeding Rs. 2000 vide cheque / RTGS / digital modes.

(9)     Sale of unquoted shares to be taxed at (deemed) fair value.

(10) In absence of PAN of the buyer of specified goods, the rate of TCS will be twice of the extent rate or 5%, whichever is higher.

(11)    From financial year 2017-18, if Return is not filed within due date, late fee of Rs. 5000 for delay up to 31st December, and Rs. 10000 thereafter.

(12)  Every person who is eligible to obtain AADHAR number, should quote such number, on or after 1 July 2017, in the Return of income. Furthermore, every person who has been allotted PAN as on 1st July 2017 must intimate the AADHAR number to the Tax Authority, failing which, PAN allotted to such person shall be deemed to be invalid. Kindly note that linking of AADHAR with PAN is not possible, unless name as per AADHAR and PAN match perfectly. Hence, please take steps to rectify your name as per AADHAR to match as per PAN.

(13)   Where Sec.12AA registered trusts modify their objects clause, they need to apply within 30 days to CIT for approval of the modified clauses

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