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Tax highlights from the Union Budget 2018-19

The Union budget was presented to the Parliament on 1 February 2018 by the Finance Minister Arun Jaitley. It was highly anticipated, since it was the first budget after the implementation of Goods and Service Tax (GST) in India. The budget included the annual financial statement and the finance bill of India for the financial year 2018-19.

Taxation Highlights 

  • Direct Tax Collections for FY 2017-18 are at Rs 6.56 lakh, which shows a growth of 18.2% up to December, 2017. As many as 85.51 lakh new taxpayers filed their tax returns in 2016-17, as against 66.26 lakhs in 2015-16. The number has increased from 6.47 crore in FY 2014-15 to 8.27 crore by FY 2016-17.
  • Rebates in presumptive income schemes for small businesses with income below Rs 2 crore and similar schemes for professionals with income below Rs 50 lakh were proposed by the Finance Minister. There was additional income tax collection of Rs 90,000 crore in 2016-17 and 2017-18.
  • In order to boost the MSME sector, the corporate tax for companies with turnover up to Rs 250 crore was reduced to 25 %, decrease of 5%.
  • The emoluments were proposed to be revised for President of India at Rs 5 lakh from Rs 1.50 lakh per month, Rs 4 lakh for vice president from Rs 1.25 lakh per month and Rs 3.5 lakh for governors from Rs 1.10 lakh per month.
  • For salaried taxpayers standard deduction of Rs 40,000 was announced. It has substituted transport allowance of Rs 19,200 and medical allowance of Rs 15000. The income tax slabs remain unchanged.
  • In regards to capital gains tax, long-term capital gains are proposed to be taxed at 10 % on gains arising from the transfer of listed equity shares over Rs 1 lakh, without the allowance for indexation benefit. Short term capital gains tax remains unaltered at 15 %.
  • Exemption in interest income on bank deposits was also raised to Rs 50,000 for Senior citizens, along with income from Bank FDs and post offices which previously had Rs 10,000 exemption. Hence, TDS shall not be required to be deducted under section 194A. This will be applicable on all fixed deposit schemes and recurring deposit schemes.
  • The budget also proposes 10 % dividend distribution tax on income by equity-oriented mutual funds as well as 100 % deductions for cooperative societies that earn income from fishing, cottage industries, sale of agricultural harvest, cottage industries and milk supplied by the members to milk cooperative societies under Section 80P.
  • No adjustment would be required for transactions in immovable property where Circle Rate value does not exceed 5% of the consideration. This would benefit the Real estate sector.
  • PAN number is mandatory for any entity entering into a financial transaction of Rs 2.5 lakh or more. From April 1 onwards PAN will be used as Unique Entity Number for non-individuals.
  • It is also proposed to amend Employees PF Act to reduce contribution of women joining the workforce for the first time to 8% from 12% or 10% (as applicable) for the first three year. There will be no change in employer’s contribution. This will encourage more women to find employment.
  • Government announced 8.33% contribution to EPF for new employees for three years and 12% government contribution to EPF in sectors employing large number of people.
  • The Pradhanmantri Vaya Vandana Yojana (PMVVY) scheme has been extended until March, 2020. The current investment limit of Rs 7.5 lakh per senior citizen is also proposed to be increased to Rs 15 lakh.
  • Under section 80DDB, the deduction limit for medical expenditure for certain critical illness was increased from Rs 60,000 in case of senior citizens and Rs 80,000 in case of very senior citizens, to Rs 1 lakh.
  • Custom duty on mobile phones is proposed to increase from 15 % to 20 %, to 15% on some of their parts and accessories and also on certain parts of televisions.
  • Cess on Income tax has been proposed to be increased by 1% to 4%, increasing the tax payable by all categories of tax payers.

We serve a number of clients who need assistance for various legal, financial and tax matters who have benefitted from our professional services. We also assist in setting up business in India, company registration in India, income tax return filling, bookkeeping and accounting. Find out more on how we can help your business by speaking to one of our advisors at AJSH & Co LLP. If you have any query regarding this Click Here.


Avoid these common mistakes in income tax, keep tax notice at bay

In recent months, the tax department has stepped up efforts to ensure tax compliance. New rules have been introduced to plug tax leaks and officials are cracking down on evasion. Tax records are being put under the scanner and notices are being sent to individuals if the computer-aided selection system notices a discrepancy. Thousands of taxpayers have already received tax notices.

A notice from income tax department is a reason for taxpayer’s worry. There are few common mistakes which invites a call from income tax department. Thus, knowing these mistakes could help you avoid income tax notices.

  1. Not reporting interest incomes

One should report all the interest incomes received or accrued due to him in the previous financial year (for which the return is being filed) while filing his tax returns. Not reporting of interest income from bank and other sources is one of the most prominent reasons resulting in issue of income tax notice. Income tax department gets information of interest, commission & other income of the depositor from multiple sources. Non- reporting results in automatic issue of notices by the income tax system.

Smart tip: Calculate how much interest you will get on your FDs, RDs and other fixed income investments and add that to your income.

  1. Not filing income tax returns

Individual are required to file the income tax return only if income exceeds the basic exemption limit. Lot many taxpayers don’t file the return presuming that return is mandatory only if they have the tax liability. For instance, a person with a salary income of INR 4 Lakh and 80C deduction of INR 1.50 Lakh is required to file the return of income as income is above basic exemption limit even though the tax liability is Nil. Non- filing of return results in notice. It is advisable to file the income tax return even if the income is below basic exemption limit if they have carried out any high value transactions, as it will enable them to avoid income tax notice.

Further, many people don’t file their income tax returns because they have long term capital gains which are tax-exempt and without this their gross total income is below the tax-exempt income level. However, as per recent amendments in section 139 (1) of the Act, if your exempted long term capital gains along with gross total income exceeds the minimum exemption level, you are required to file your income tax return.

Smart tip: Do not miss filing your return even if your tax is zero or all your taxes are paid. File online to avoid mistakes.

  1. Non reporting of tax free incomes

As a taxpayer, you are duty bound to report all your income even if some is tax-free. One of the reasons for income tax notice is that the investment by taxpayer is not in accordance with the income profile of the taxpayer. There are lot many taxpayers who don’t discloses exempt income on the pretext that it don’t have any tax implications. Exempt income includes income such as LIC money back, PPF withdrawals, ELSS withdrawals etc. Often the amount of exempt income is in lump sum and invested back by the taxpayers in other investment avenues. By disclosing exempt income, taxmen are automatically able to link the source of new investment from exempt income. Disclosure of exempt income in ITR forms also could be treated as
self-explanatory for the spending of the taxpayers towards foreign travel, credit card & other spending. Thus, these exempt incomes are to be reported in the ‘Exempt Income’ schedule of the ITR and you can claim exemption on these under various sections of the Income Tax Act.

Smart tip: Mention all tax-free income in your ITR but claim exemption for it under various sections.

  1. Verify 26AS before filing tax return

26AS is a taxpayer’s statement showing the data of the assessee available with the income tax department. Taxpayer should verify that their return incorporates the data available in 26AS. Taxpayer should take efforts to rectify 26AS in case it contains entry not related to him. Taxpayer can avoid notices by verifying 26AS before filing income tax return.

Smart tip: Verify 26AS before filing income tax return.

  1. Non reporting of transaction in Income Tax Return

Non reporting of transactions in income tax return form is one of the most prominent reasons for inviting income tax notices. Even though the transaction has resulted in loss, it is better to disclose the loss figure in income tax return to avoid notices. These types of incidents are often there in shares, mutual funds & property. Be careful, disclose & avoid unwanted notice from income tax department.

Smart tip: Report all transactions including the transactions resulting in losses in income tax return.

  1. Misusing forms 15G / 15H to avoid TDS

Many investors try to avoid TDS by splitting their investments across different banks. Many others submit Form 15G or 15H so that their bank does not deduct TDS. These forms are declarations that the individual’s income for the year is below the taxable limit and therefore no TDS should be deducted from the interest. These are now required to be e-filed by the banks & other recipient. As a result, the income tax systems have handy information of all the taxpayers who have wrongly filed the declaration form. Taxpayers submitting this form in a casual way started receiving notice from the income tax department. Further, misuse of these forms is a serious offence. A false declaration not only attracts penalty but also prosecution.

Smart tip: File Forms 15G only if you fulfil both the conditions i.e. your taxable income for the year does not exceed the basic exemption of INR 2.5 Lakh and the total interest received during the financial year does not exceed the basic exemption slab of INR 2.5 Lakh. TDS is an interim tax and you can claim a refund if you have paid more than due.

  1. Non deduction of TDS

TDS net is widening to include individual taxpayers who are not in any kind of business or profession. Now, purchase of property above INR 50 Lakh attracts TDS. The rule is applicable even if you pay in instalments. In such cases, the TDS needs to be deducted from each payment and the money deposited with the government within seven days. While TDS deduction happens automatically when you buy a new property from a builder, in case of transactions between individuals, it is often ignored.

In addition, payment of rent exceeding INR 50,000 p.a. also attracts TDS. Non-deduction or non-filing of the TDS return after deduction / payment invites notice from the revenue office.

Smart tip: Make it clear to the seller of property / property owner that you will be deducting TDS from the payment. Make sure you have his correct PAN details.

  1. Non reporting of Cash deposit

Change in income tax return forms is an annual feature. This year, income tax return form required taxpayer to disclose the amount of cash deposited in a bank account. Also, if your expenses or cash withdrawals exceed certain limits, your credit card company and your bank are supposed to report that to the tax department. Thus, income tax systems have already received the information from the banks of all the taxpayers regarding their cash deposits. Taxpayers with heavy cash deposits or unmatched data are catching an eye of income tax and the income tax department may send a notice or pick up such cases for scrutiny.

Smart tip: Avoid cash transactions as far as possible. If depositing cash in bank account, keep record of source of cash.

Thus, precisely don’t forget to incorporate all the income details in income tax return. Don’t fail to file the income tax return. Disclose all the transactions, mainly of shares & property. Don’t be casual in submission of Form No. 15G / 15H. Be updated about the changing tax laws, more particularly about the TDS provision on property & rent & deduct proper TDS. Report all income. Disclose all the bank accounts correctly with cash deposits figure. Verify 26AS before filing income tax return & be a happy taxpayer.

For a more detailed discussion on income tax issues, or to obtain further assistance in personal income tax filings, corporate tax filings, tax planning, income tax assessments, response to income tax notices, please contact AJSH & Co LLP. If you have any query regarding this Click Here.


Tax Department Unveils Draft Rules For Registration Under GST

The government has put out the draft rules for the goods and services tax for discussion ahead of the September 30 meeting of the centre and states to discuss the regulations. In view of the right deadline, the finance ministry has asked for feedback by September 28. Rules relate to registration, invoice and payments, laying down procedures, guidelines and documentation.

The GST council will discuss the rules on September 30, The government has prescribed a largely online process for registration and laid down strict timelines for completing the process. We intend to have these rules approved by GST council in its meeting on 30th September so that business systems can be modified by all revenue.

It’s encouraging to see that the rules largely envisage electronic interactions between the tax authorities and industry with only need-based physical intervention like verification of premises on the application filed for Private company Formation in Gurgaon Indirect tax. Further all the PAN details are to be verified online with CBDT database which is expected to bring larger part of the business in the mainstream.

Your desired name must be included, typically with a corporate identifier, such as Corporation, Incorporated, Company, or an abbreviation, such as Inc. You may want to conduct a preliminarily name available search before submitting the Incorporation documents. If you incorporate online, the company incorporation in gurgaon service you purchase will typically include this. Remembers that the state holds final approval rights to ensure that a name is not already in use or in deceptive similar to one in use.

Much of this had already been explained through the FAQs issued by the finance industry earlier giving industry an advance peak into the details. Rules provide for complete electronic payment of tax and adjustment of credit and a unique ID number will be generated by the common portal for GST transactions for every debit or credit transaction.

If you have any query regarding this Click Here