A quick review (Limited Information) of the applicable provisions under the income tax act after incorporating the amendments proposed by the Budget of 2016 are given below for ready reference and information of our clients:-
(A) INCOME TAX CALCULATOR FOR F. Y. 2016-17 (A.Y. 2017-18)
(I) INDIVIDUALS / HUF / AOP / BOI
- General Category & Women
| SLAB | TOTAL INCOME | Rate
of Tax |
TAX CALCULATOR | COMMENTS |
| I | Upto Rs. 2,50,000/- | 0 % | NIL | No Change |
| II | Rs. 2,50,001/- to Rs. 5,00,000/- | 10 % | (Total Income – 2,50,000)*10% – 5000 | Rebate u/s 87A increased from 2000/- to 5000/- |
| III | Rs. 5,00,001/- to Rs. 10,00,000/- | 20 % | 25000 + (T.I. – 500000)*20% | No Change |
| IV | Above Rs. 10,00,000/- | 30 % | 125000+(T.I.–10,00,000)*30% | No Change |
2. Senior Citizen – Age 60 Years
| SLAB | TOTAL INCOME | Rate
of Tax |
TAX CALCULATOR | COMMENTS |
| I | Upto Rs. 3,00,000/- | 0 % | NIL | No Change |
| II | Rs. 3,00,001/- to Rs. 5,00,000/- | 10 % | (Total Income – 3,00,000)*10% – 5000 | Rebate u/s 87A increased from 2000/- to 5000/- |
| III | Rs. 5,00,001/- to Rs. 10,00,000/- | 20 % | 20000 + (T.I.–5,00,000)*20 % | No Change |
| IV | Above Rs. 10,00,000/- | 30 % | 120000+(T.I.–10,00,000)*30% | No Change |
3. Very Senior Citizen – Age 80 Years
| SLAB | TOTAL INCOME | Rate
of Tax |
TAX CALCULATOR | COMMENTS |
| I | Upto Rs. 5,00,000/- | 0 % | NIL | No Change |
| II | Rs. 5,00,001/- to Rs. 10,00,000/- | 20 % | (T.I. – 5,00,000)*20 % | No Change |
| III | Above Rs. 10,00,000/- | 30 % | 1,00,000+(T.I.–10,00,000)*30 % | No Change |
Surcharge – Total Income upto 1 Crore – NIL
Total Income > 1 Crore – 15% [Raised from 12%]
Education Cess – 3% of the Income Tax & Surcharge
(II) PARTNERSHIP FIRMS
(i) Rate of Income Tax @ 30 % of Total Income
Surcharge – Total Income upto 1 Crore – NIL
Total Income > 1 Crore – 12%
Education Cess – 3% of the Income Tax & Surcharge
(ii) Remuneration to Partners (if provided in the Partnership Deed) may be paid out of
Total Income before computation of Tax, with a maximum ceiling as follows:
| On the first Rs. 3,00,000/- of the Book Profits or in case of Loss | Rs. 1,50,000/- or @ 90 % of Book Profits, whichever is Higher |
| On balance of the Book Profits | @ 60% of Book Profit |
- Interest on Partners Capital (if provided in the Partnership Deed) is allowed upto a
Maximum of 12 % p.a.
(III) COMPANIES
- Rate of Income Tax:-
| Category of Company | Rate of Tax |
| New Manufacturing Company incorporated after 01-03-2016
[Option Subject to following conditions; (a) do not claim profit linked or investment linked deductions and (b) do not avail of investment allowance and accelerated depreciation.] |
25% |
| Companies with Turnover of upto Rs. 5 Crores during the F. Y. ending March, 2015 | 29% |
| Start-ups Registered from 01-04-2016 to 31-03-2019 | 0% -For 3 out of 5 years
[MAT applicable under 115JB] |
| Other Domestic Companies | 30% |
OTHER NON-DOMESTIC COMPANIES
(1) on so much of the total income as consists of,—
| (a) | royalties received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1961 but before the 1st day of April, 1976; or | 50% |
| (b) | fees for rendering technical services received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 29th day of February, 1964 but before the 1st day of April, 1976, and where such agreement has, in either case, been approved by the Central Government |
(2) on the balance, if any, of the total income – 40 %
Surcharge –
- Domestic company
Total Income upto 1 Crore – NIL
Total Income > 1 Crore and upto 10 Crores – 7 %
Total Income > 10 Crores – 12 %
- Other Companies
Total Income upto 1 Crore – NIL
Total Income > 1 Crore and upto 10 Crores – 2 %
Total Income > 10 Crores – 5 %
Education Cess – 3% of the Income Tax & Surcharge
(ii) Minimum Alternate Tax (M.A.T.) – The rate of MAT payable by a company is 18.50% u/s 115 JB.
- The period allowed to carry forward the tax credit under MAT is ten years.
PHASING OUT DEDUCTIONS UNDER INCOME TAX
- Accelerated Depreciation wherever provided under the IT Act will be Limited to maximum 40% from 01-04-2017;
- Benefit of deductions for Research would be limited to 150% from 01-04-2017 and 100% from 01-04-2020;
- Benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31-03-2020;
- The weighted deduction under section 35CCD for skill development will continue up to 01-04-2020.
(B) RATES OF DEPRECIATION UNDER INCOME TAX ACT
| ASSET | RATE OF DEPRECIATION |
| Plant & Machinery | 15 % |
| Computers including Software | 60 % |
| Motor Cars | 15 % |
| Furniture & Fixtures | 10 % |
| Building | 5 % |
(C) LIMIT FOR AUDIT UNDER INCOME TAX ACT
| CATEGORY OF ASSESSEE | LIMIT OF GROSS RECEIPTS/ TOTAL SALES/ TURNOVER |
| A person carrying on Business |
Exceeding Rs. 2 Crore during the year |
| A person carrying on Profession | Exceeding Rs. 50 Lakhs during the year |
(D) PRESUMPTIVE COMPUTATION PROFIT
(i) FOR SMALL BUSINESSES (Section 44 AD)
Turnover upto Rs. 200 Lakhs
Deemed Profit – 8% of Gross Receipts
(ii) FOR SMALL PROFESSIONAL (Section 44 ADA)
Gross Receipt upto Rs. 50 Lakhs
Deemed Profit – 50% of Gross Receipts
NOTES
- The Partnership Firms were previously eligible to claim deduction of Partners Remuneration and Interest paid to partners out of the Deemed Profit declared under this section, however w.e.f. A.Y. 2017-18 Proviso to Sub-Section 2 to Section 44 AD has been omitted and hence it is presumed that the Partners Remuneration and Interest have already been deducted before calculating the Deemed Profit.
- Where an eligible assessee u/s 44 AD, declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the five assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for five assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1). Provision of Audit shall be mandatory in case of income exceeding maximum amount not chargeable to tax.
BENEFITS
- Exemption from the compliance burden of maintaining books of accounts.
- Exempted from advance tax and allowed to pay their entire tax liability before the due date of filling the return or actual date of filing their return whichever is earlier.
FOR CLAIMING PROFIT LOWER THAN DEEMED PROFIT
Audit of the Books of Account are prescribed, for Claiming Profits lower than the presumptive (deemed) profits prescribed under the deeming provisions noted above.
(E) TAXATION ON EQUITIES (SHARES):-
TAX ON CAPITAL GAIN (PROFIT) FROM SALE OF EQUITIES (SHARES)
(i) Short Term Capital Gain on Sale of Equities & EO MFs, : Tax @ 15 %
on a Recognised Stock Exchange in India
(ii) Long Term Capital Gain on Sale of of Equities & EO MFs, : NIL
on a Recognised Stock Exchange in India
(iii) Shares of Unlisted companies if sold after 2 years, shall be treated as Long Term
Capital Gain
Additional Income Tax @ 10% of Gross Amount of Dividend will be payable by a recipient receiving dividend in excess of Rs. 10 Lakhs during a year.
(F) KEY DEDUCTIONS AND BENEFITS UNDER INCOME TAX FOR INDIVIDUALS
| Section | Nature | Deduction Limit | Comments |
| 24 (b) | Interest on Housing Loan (Self Occupied) | Upto Rs. 2 Lakhs
|
No Change |
| 80 C | Investments in Life Insurance Premium, PF, PPF, NSC, ULIP, Tax Benefit Mutual Funds, Tution Fees (2 Child), Home Loan Principal Repayment, Notified Bonds, 5 Yr FDs etc | Upto Rs. 1.50 Lakhs | No Change |
| 80 CCD | Investment in Pension Scheme | Upto Rs. 0.50 Lakhs | No Change |
| 80 D | Mediclaim Insurance | Sr. Citizen : Rs. 30000/-
Others : Rs. 25000/- |
No Change |
| Very Senior Citizen : Rs. 30000/- | Including Premium and Medical Expenditure | ||
| 80 EE | Interest on Loan taken for Residential House Property | Rs. 50000/- | Conditions:-
1. First time House Purchase 2. Home Loan sanctioned in 2016-2017 3. House Cost upto Rs. 50 Lakhs or Less 4. Loan Amount upto 35 Lakhs or Less 5. When the deduction is allowed for Interest under this section, deduction shall not be allowed in respect of such interest under any other provision of this act. |
| 80 GG | Rent Paid | Lower of Following:
1. Rs. 5000 p.m. 2. 25% of Total Income; 3. Rent Paid – 10% of Total Income |
Lower Limit increased from Rs. 24000/- p.a. to Rs. 60000/- p.a. |
| 80 JJA | Deduction in respet of Employment of new employees | 30% of Additional Employee Cost
(Conditions of Additional Employee Cost are separately discussed)
|
Conditions:-
1. Section 44AB should be applicable; 2. Gross Total Income includes Profits & Gains of Business; 3. Accountant Report is submitted in Prescribed Format.
No Deduction in Following cases:- 1. The business is formed by splitting up, or the reconstruction, of an existing business; 2. The business is acquired by the assessee by way of transfer from any other person or as a result of any business reorganization; |
THESE ARE GENERAL GUIDELINES FOR PRELIMINARY UNDERSTANDING AND CALCULATION OF INCOME TAX LIABILITY IN F. Y. 2016-17 (A.Y. 2017-18), HOWEVER FOR SPECIFIC CALCULATION AND CONSULTANCY, A MAIL COULD BE SENT TO rp@ritulpatwa.com