BUDGET HIGHLIGHTS- DIRECT TAXES

• There is no change in the tax slab. However, Education cess and Secondary and Higher Education cess have been increased from total of 3 to 4 % and to be known as Health and Education cess.

• Domestic Companies having total turnover or gross receipts not exceeding Rs 250 crores in financial year 2016-17 shall be liable to pay tax at 25% as against present ceiling of Rs 50 crore.

• Long term capital gain exemption under section 10(38) in respect of listed STT paid shares being withdrawn and will be taxed at 10% under Section 112A. Further, such tax will be liable for TDS. However, capital gain up to 31.1.2018 shall grandfathered i.e. not be taxed as cost of acquisition will be taken as Fair Market Value as on 31.01.2018.

• Standard deduction of Rs 40,000/- for salaried employees. However, benefit of Transport allowance of Rs 19,200/- and Medical Reimbursement of Rs 15,000/- under Section 17(2) have to be withdrawn. Thus, net benefit to salaries class only Rs 5,800/-.

• Provision of Section 43CA, 50C and 56(2)(x) being amended to allow 5%  of sale consideration in variation vis-a-vis stamp duty value.

• Provision of section 40(ia) and 40A(3) and 40A(3A)have been made applicable to Charitable Trust . Hence,  expenditure incurred without deduction of tax and in cash will not be eligible as application of income under section 10(23C) and section 11(1)(a).

• Agriculture Commodity Derivates income /loss not to be considered as speculative under section 43(5).

• Income Computation and Disclosure Standards (ICDS) have been given statutory backing in view of Delhi High Court decision.

• Marked to market loss computed as per Income Computation Disclosure Scheme(ICDS) to be allowed under section 36.

• Gain or loss in Foreign Exchange as per Income Computation Disclosure Scheme(ICDS) to be allowed under new section 43AA.

• Construction Contract income to be computed on percentage completion method as per Income Computation Disclosure Scheme(ICDS).

• Valuation of inventory including securities to be as per Income Computation Disclosure Scheme(ICDS).

• Interest on compensation, enhanced compensation claim or enhancement claim, subsidy and incentives to be taxed in the year of receipt only as per new Section 145B.

• Conversion of stock in trade to capital asset to be charged as business income in the year of conversion on fair market value on the date of conversion.

• Benefit of investment in Bonds under section 54EC, to be restricted to Capital gain on land and building only. Further, period of holding being increased from 3 years to 5 years.

• PAN to be obtained by all entities including HUF other than individuals in case aggregate of financial transaction in a year is Rs 2,50,000 or more. All directors, partners, members of such entities also to obtain PAN.

• All companies irrespective of income have to file return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact whether it has tax liability of Rs 3,000 or not.

• Assessments to be E-assessment under new section 143(3A)

• No adjustment under section 143(1) while processing on account of mismatch with 26AS and 16A.

• Deemed dividend to be taxed in the hands of the company itself as Dividend Distribution Tax @ 30%.

• Penalty for non-filing of financial return as required under section 285BA being increased to Rs 500 per day.