Budget 2017 highlights

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Budget 2017

Foreword
Page 2 of 23Private & Confidential
Union Budget presented by Finance Minister on 1st February, 2017 has broken the age old practices with
following changes:
• Budget has been advanced to 1st February to enable various ministries to operationalise all activities
from commencement of financial year i.e. 1st April itself
• Railway Budget has been merged with General Budget and thus the colonial practice prevalent since
1924 has been done away with.
• Classification of expenditure as plan and non plan has been done away with and the budget allocations
are only divided into capital and revenue expenditure.
Finance Minister has kept the theme of the budget as “Transform, Energise and Clean India” that is, TEC
India. Budget has taken several measures to achieve the Government's aim to curb black-money. Focus
has also been placed on growth schemes in rural areas and steps been taken in digitizing the economy.
This Budget has brought tax relief for individual assessee and domestic companies having turnover upto
INR 50 Crores. Further it has also cleared the air over applicability of indirect transfer provisions to
Foreign Portfolio Investors (FPIs) (category I and II) with retrospective effect from 1st April 2012. It is also
proposed to abolish Foreign Investment Promotion Board (FIPB) and further liberalise the foreign direct
investment (FDI).
In all it can be said that this budget is focused, target oriented and prepared keeping in mind the long
term vision for the Indian economy.

Budget Key Highlights
Economic Indicators
Direct Tax
Page 3 of 23
Budget 2017 – Presentation Outline
Indirect Tax
Policy Changes
Private & Confidential

Tax Proposals – Tax Savings
Rate of Tax for individuals/HUF/BOI/AOP having income between Rs.2.5
Lakh- Rs.5 Lakh reduced to 5% from 10%.
Rate of Tax for smaller companies, having annual turnover up to Rs.50
Crores in financial year 2015-16, has been reduced to 25% from 30%.
Rate of presumptive income for taxpayers, having turnover up to Rs.2
Crores, has been reduced to 6% from 8% in respect of turnover received
by Non-cash means.
Change in existing provision to provide for non deduction of TDS U/s 194D
on commission payable to individual insurance agents subject to filing of
self declaration.
Period for concessional withholding rate of 5% on interest earned by
foreign entities in ECB or Bonds/Securities has been extended from
30.06.2017 to 30.06.2020. This benefit is also extended to Rupee
denominated (Masala) Bonds.
 Provision of concessional tax rate of 10% per cent in case of income
arising from sale of carbon credits.
Increase in the period of carry forward of MAT Credit from 10 years to 15
years.
Budget 2017 – Key Highlights

Rebate u/s 87A has been reduced to Rs.2,500/- from Rs.5,000/-. Further
rebate shall only be available to resident individuals whose total income
does not exceed Rs.3,50,000/-.
Limit of cash payments for both revenue and capital expenditure, has
been reduced to Rs.10,000/- from Rs.20,000/- to a person in a day.
It is proposed to levy a surcharge of 10% of tax payable on
individuals/HUFs/AOP/BOI whose taxable income is between Rs.50 lakhs
and Rs.1 Crore. The existing surcharge of 15% of tax on people earning
more than Rs.1 Crore will continue.
The limit of cash donation which can be received by a charitable trust is
being reduced from Rs.10,000/- to Rs.2,000/- from one person.
The government has accepted the suggestion of SIT (Black Money) that no
transaction above Rs.3 lakh would be permitted in cash.
The maximum amount of cash donation that a political party can receive
from one person has been capped at Rs.2,000/-. However, parties will be
entitled to receive donations by cheque or digital modes of any amount
from their donors.
Page 5 of 23
Tax Proposals –Tax Enhancement

The threshold limit for audit of business entities who can opt for
presumptive income scheme has been increased from Rs.1 Crore to Rs.2
Crore.
Professionals opting for presumptive taxation (available for earning upto
Rs.50 Lacs) can pay advance tax in one instalment in March instead of
four instalments at present.
The threshold turnover limit for maintenance of books for individuals
and HUF increased from 10 Lakhs to 25 Lakhs and income limit increased
from 1.2 Lakhs to 2.5 Lakhs
The time limit for revision of income tax return has been reduced to 12
months from completion of financial year.
The base year of indexation for calculating capital gains has been shifted
from 01.04.1981 to 01.04.2001 for all class of assets including
immovable property.
The holding period for considering gain from immovable property as
long term has been reduced from 3 to 2 years.
It is proposed to extend the basket of financial instruments in which
capital gains can be invested without payment of tax.
Other Tax Proposals

Economic Indicators
Page 7 of 23
Economic Indicators
Direct Tax
Indirect Tax
Policy Changes

CPI inflation declined from 6% in July 2016 to 3.4% in December 2016 and
is expected to remain within range of 2% to 6%.
Foreign Exchange reserves have reached 361 Billion US Dollars as on 20th
January, 2017.
War against Black money launched in India through consistent steps taken
by Government of India including through the amendment proposed in
Budget 2017.
Economic Indicators
Indian Economy
Page 8 of 23
The total expenditure for 2017-18 has been budgeted at Rs.21.47 lakh
Crores. With the abolition of Plan/Non Plan Classification, the focus is
now on Revenue and Capital Expenditure.
Fiscal Deficit target is kept at 3.2 per cent of GDP in FY 2017-18.
Revenue Deficit target is kept at 1.9 per cent of GDP in FY 2017-18.
Fiscal Management

Demonetisation was a bold and decisive measure taken by the government
to curb tax evasion and parallel economy.
This exercise was a part of Government’s resolve to fight corruption, black
money, counterfeit currency and terror funding.
This move is expected to generate long term benefits in terms of reduced
corruption, greater digitisation of the economy, increased flow of financial
savings and block terror funding.
Economic Indicators
Demonetisation
Page 9 of 23
The GST Council has finalized its recommendations on almost all the
issues based on consensus on the basis of 9 meetings held.
Preparation of IT System for GST is also on schedule.
The extensive reach-out efforts to trade and industry for GST will start
from 1st April 2017 to make them aware of the new taxation system.
Goods and Services Tax (GST)

Page 10 of 23
Indirect Tax
Policy Changes
Direct Tax
Direct Tax
Economic Indicators

Direct Taxes
Individual Tax Payers
(Till 60 Years of Age)
Senior Citizens
(60 to 80 Years of Age)
Senior Citizens
(80 Years and above)
Income Tax Rate
Upto 2,50,000 Exempt
2,50,001 to 5,00,000 5%
5,00,001 to 10,00,000 20%
Above 10 Lacs 30%
Income Tax Rate
3,00,001 to 5,00,000 5%
5,00,001 to 10,00,000 20%
Above 10 Lacs 30%
Income Tax Rate
5,00,001 to 10,00,000 20%
Above 10 Lacs 30%
Page 11 of 23
Individual
Tax Rates

 Existing rate of taxation for individual/HUF/AOP/BOI assesses between income of 2.5
lakhs to Rs.5 lakhs reduced to 5% from the present rate of 10%
 Rebate u/s 87A has been reduced to Rs.2,500/- and rebate shall be available to
resident individuals whose total income does not exceed Rs.3,50,000/-.
 Surcharge of 10% of tax payable on categories of individuals whose annual taxable
income is between Rs.50 Lakhs and Rs.1crore
 In order to make MSME companies more viable, tax rate for companies having
turnover up to Rs.50 Crore in financial year 2015-16 is reduced to 25%.
 Transaction above Rs.3 lakh would not be permitted in cash subject to certain
exemptions provided for U/s 269ST. Provision have been made U/s 271DA for levying
equivalent penalty on the recipient in case of contravention.
 Individual or HUF (not liable for tax audit), will be required to deduct TDS @ 5% for
rental payments exceeding Rs.50,000/- per month U/s 194-IB w.e.f. 1st June 2017.
 In case Indian company or PE of a foreign company in India pays interest exceeding
rupees one crore than the interest amount in excess of 30% of EBITDA shall not be
allowed as deduction. The interest disallowed can be carried forward and set off for
eight Assessment years.
 Current year loss under the head “Income from house property” from Interest on
housing loans which can be set off against income under any other head has been up
capped to Rs.2 lakhs only. The loss not so set off can be carried forward for next
eight assessment years.
Direct Taxes
Important Changes

 Commission payable to individual insurance agents exempt from the requirement of
TDS subject to their filing a self-declaration that their income is below taxable limit
 Scope of domestic transfer pricing restricted to cases where one of the entities
involved in related party transaction enjoys specified profit-linked deduction
 MAT credit is allowed to be carried forward up to a period of 15 years instead of 10
years at present
 Allowable provision for Non-Performing Asset of Banks increased from 7.5% to 8.5%.
Interest has been made taxable on actual receipt basis instead of accrual basis in
respect of NPA accounts for all non-scheduled cooperative banks at par with
scheduled banks.
 Under scheme of presumptive income for small and medium tax payers whose
turnover is up to 2 crores, the present tax rate of 8% of turnover which is counted as
presumptive income is reduced to 6% in respect of turnover which is by non-cash
means.
 Under scheme for presumptive taxation for professionals with receipt up to 50lakhs
per annum advance tax can be paid in one instalment in March instead of four.
 Time period for revising a tax return is being reduced to 12 months from completion
of financial year, at par with the time period for filing of return. Also time limit for
completion of scrutiny assessments is being compressed further from 21 months to
18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year
2019-20 and thereafter.
Direct Taxes
Page 13 of 23
Important Changes

Trusts
 Donation by an entity registered u/s 12A or approved u/s 10(23C) to other entity
registered u/s 12A with the direction that such donation shall form part of the
corpus, shall not be treated as application of income for charitable purposes.
 If a trust or an institution, which has been granted registration, and, has adopted or
undertaken modification of the objects subsequently which do not conform to the
conditions of registration, shall be required to obtain fresh registration.
Direct Taxes
Page 14 of 23
 Provisions of section 115BBDA extended to provide for tax @10% on dividend income
exceeding 10Lakh to all persons except domestic companies or trust or institution
or fund registered u/s 12AA or 10(23C).
Dividend
 In order to align the transfer pricing provisions with the OECD transfer pricing
guidelines and international best practices, it is proposed to insert a new section to
provide that the assessee shall make secondary adjustment where the primary
adjustment to the transfer price has been made in certain cases. The provision shall
apply if the primary adjustment exceeds one crore rupees and the excess price
attributable to the adjustment is not brought to India within the prescribed time.
Transfer Pricing

 Reduction in the holding period for computing long term capital gains from transfer
of immovable property from 3 years to 2 years.
 Base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all
classes of assets including immovable property.
 Transfer of unquoted equity shares, where the FMV is less than the consideration
received, FMV shall be deemed to be the sale consideration for the purpose of
computation of Capital Gains.
 Foreign Portfolio Investor (FPI) Category I & II exempted from indirect transfer
provision. Indirect transfer provision shall not apply in case of redemption of shares
or interests outside India as a result of or arising out of redemption or sale of
investment in India which is chargeable to tax in India.
 It is proposed to exempt capital gains arising out of transfer of a rupee denominated
bond by a non-resident to a non-resident.
 Exemption from LTCG in case of transfer of listed shares shall be available if security
transaction tax has been paid at the time of acquisition of such shares where they
have been acquired after 1st October, 2004.
Capital Gains
Direct Taxes

Others
 It is proposed to amend the provisions relating to computation of book profit for the
purpose of levy of minimum alternate tax (MAT) so as to take into consideration the
impact of Ind-AS on the financial statements of companies.
 Capital asset referred to in section 35AD is used for an ineligible business and the
benefit of said section is withdrawn, the actual cost to the assessee in respect of
such asset shall be the actual cost to the assessee, as reduced by an amount equal
to the amount of depreciation.
 It is proposed to do away with the provisions enabling the Assessing Officer not to
process the return and thus withhold the refund in cases where the return is
selected for scrutiny till the completion of assessment. It is however proposed that
in cases where grant of refund is likely to adversely affect the interest of revenue, it
can be withheld with the approval of the higher authority after recording the
reasons in writing.
 Section 194J will be amended to reduce the rate of deduction of tax from 10% to 2%
in case of payments made to a person engaged only in the business of operation of
call centre.
 From AY 2018-19 If return not filed as per Sec. 139 (1), late fee of Rs. 5000 for delay
up to 31st December and Rs.10000 thereafter has been proposed. (Section 234F).
 It is proposed to authorise the Central Board of Direct Taxes (CBDT), to issue
directions or instructions in order to remove hardships faced by the taxpayers in
connection with imposition of penalty relating to TDS or TCS
Direct Taxes

Indirect Tax
Page 17 of 23
Indirect Tax
Direct Tax
Policy Changes
Economic Indicators

 No change in peak rate of Basic Customs Duty (“BCD”).
 Following changes are made in the rates of duty of specific items:
Indirect Taxes
Customs Duty
Page 18 of 23
Name of Item Tax Change
LNG BCD reduced from
5% to 2.5%
Miniaturised POS card reader for m-POS, micro ATM standards
version 1.5.1, Finger Print Readers/Scanners and IRIS Scanners
including part and components for manufacturing of these items
BCD, Excise/CV
Duty and SAD
exempt
Populated printed circuit boards (PCBs) used for making mobile
phones
Additional SAD @
2% is imposed
Silver medallion, silver coins, having silver content not below
99.9%, semi-manufactured form of silver and articles of silver
CVD @ 12.5% is
imposed
Medium Quality Terephthalic Acid (MTA, Qualified Terephthalic
Acid (QTA),
BCD reduced to 5%
from 7.50%
Cashew nut, Roasted, Salted or roasted and salted. BCD increased to
45% from 30%
Vegetable tanning extracts, namely, Wattle extract, Myrobalan
fruit extracts
BCD reduced to
2.50% from 7.50%

Indirect Taxes
Page 19 of 23
Excise Duty
Name of Item Tax Change
All items of machinery required for balance systems operating on
biogas/bio-methane/by-product hydrogen.
Reduced from
12.50% to 6%
Membrane sheet and Tricot/Spacer for use in the manufacture of
RO membrane element for household type filters
Reduced from
12.50% to 6%
Miniaturised POS card reader for m-POS, micro ATM standards
version 1.5.1, Finger Print Readers/Scanners and IRIS Scanners
including part and components for manufacturing of these items
Exempt
Silver medallion, silver coins, having silver content not below
99.9%, semi-manufactured form of silver and articles of silver
CVD @ 12.5% is
imposed
 The standard rate of Excise duty is maintained at 12.5%. Following changes are made
in the rates of duty of specific items:
Service Tax
 Standard rate of Service tax is maintained at 15% (inclusive of SBC and KKC).
 It is proposed to amend the Rule 2A of service tax with retrospective effect from
01.07.2010 so as to make it clear that value of service portion in execution of works
contract involving transfer of goods and land or undivided share of land, as the case
may be, shall not include value of property in such land or undivided share of land.

Indirect Taxes
 Service tax is proposed to be exempted on following :
• Service provided or agreed to be provided by the Army, Naval and Air force group
Insurance funds by way of life insurance to members of the Army, Navy and Air force
under the group insurance schemes of the central government with retrospective
effect from 10.07.2004.
• The one time upfront amount (called as premium, salami cost, price, development
charges or by whatever name) payable for grant of long-term lease of industrial
plots (30 years or more) by State Government Industrial Development
corporations/undertakings to industrial units with retrospective effect from
01.06.2007.
 The exemption in respect of services provided by IIMs by way of two year full time
residential post graduate programmes (PGP) in management for the post Graduate
Diploma in Management(PGDM), to which admissions are made on the basis of CAT,
is being extended to include Non-Residential Programmes also.
 Service by way of ‘carrying out any process amounting to manufacture or production
of goods excluding alcohal liquor for human consumption’ is proposed to be deleted
from negative list and to be included in Exemption Notification.
 R&D Cess which is payable on all the payments made towards bringing technology,
drawings, designs, publication, special service, or technical persons into India from
a place outside India. It was presently levied at the rate of 5 % and is proposed to
be repealed effective 1st April 2017
Service Tax

Policy Changes
Page 21 of 23
Policy Changes
Direct Tax
Economic Indicators
Indirect Tax

 FIPB has successfully implemented e-filing and online processing of FDI applications.
Currently more than 90% of the total FDI inflows are now through the automatic route.
In view of this from 2017-18 it is decided to abolish FIPB and the roadmap for the same
will be announced soon.
 Further liberalisation of the FDI policy is under consideration and necessary
announcement will be made soon.
 Finance Minister announced that the Government would bring in legislation to deal with
economic offenders who fled the country. The new law would provide for the
confiscation of assets of economic offenders who keep evading the law by escaping to
foreign countries. This move would come as a major relief for enforcement agencies to
recover the same by confiscating assets.
 The Government is considering the option of amending the Negotiable Instruments Act
suitably to ensure that the payees of dishonored cheques are able to realise the
payments.
 With a view to strengthen the digital transactions in India, the Government is also
proposing to create a Payments Regulatory Board in the Reserve Bank of India by
replacing the existing Board for Regulation and Supervision of Payment and Settlement
Systems.
Policy Changes

Gurgaon
Email : snr@snr.net.in Website : www.snr.net.in
No 605, 2nd Floor, 62nd Cross,
5th Block Rajajinagar, Bangalore,
Karnataka- 560010 (India)
Tel. +91 80 42064178
110, Plot No. 56,
Institutional Area, Sector - 44,
Gurgaon – 122002, Haryana (India)
Ph: +91 124 4534650
BangalorePune
Office No. 5,Kalashree Apartment,
Opposite Bank of Maharashtra,
Karve Road,
Pune 411004 (India)
Ph: +91 20 25435788
A-15, Second Floor, Hauz Khas,
New Delhi- 110016(India)
Tel. +91 11 26856421, 41655801, 26855884,
Fax: +91 11 26567540
Head Office - Delhi
Locations
Page 23 of 23
For any clarification or further information:
Please contact:
Dinesh Singhal
Partner - Tax & Regulatory
dinesh.singhal@snr.net.in

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