Highlights of Union Budget 2017-18

The Union Budget 2017 focuses on improving the domestic economy especially in the rural areas with clear focus towards farmers, poor and the under privileged and infrastructure with increased stress on an efficient tax administration while maintaining fiscal prudence.
Another speciality of this budget its enthusiasm on youth empowerment. Budget introduced quality education programmes such as measuring learning outcomes in schools, innovation fund for secondary education, reforms in UGC so as to improve higher education, providing market relevant training, etc for energising the youth.
The Budget 2017 left much to be desired for the start-ups. The budget which focused more on digital economy of the country gave some concessions to the start-ups while holding out some of the major demands of the start-up community.
Here are the salient features of Direct Tax proposals

1. Reduction in Income tax rate from 10% to 5 % for individuals having income between Rs 2.5Lakhs – Rs 5Lakhs. This is clear cut reduction in 50% rate for the above slab.
All other categories of tax payers in subsequent brackets will get a benefit of Rs 12,500/-.
But in order to avoid the duplication effect, the budget proposed to reduce the rebate (u/s 87A) of Rs 5,000 to Rs 2,500.
That means no income tax for income up to Rs 3Lakhs. For the income class up to Rs 4.5Lakhs, there will be no income tax if they utilize the deductions under Chapter VI A.
The below table will bring out clear cut impact of the change:

Income Slab Before	Tax Rate Before	Income Slab Now	Tax Rate Now
Up to Rs 250,000/-	NIL	Up to Rs 250,000/-	NIL
Rs 250,001 to Rs 500,000/-	10%	Rs 250,001 to Rs 500,000/-	5%
Rs 500,001 to Rs 10,00,000/-	20%	Rs 500,001 to Rs 10,00,000/-	20%
Above Rs 10,00,000/-	30%	Above Rs 10,00,000/-	30%

2. There will be an additional surcharge of 10% on individual income above Rs 50Lakhs up to Rs 1Crore. Surcharge of 15% on income above Rs 1Crore will remain continued.

3. Regarding maintenance of books of accounts for individuals, threshold limit has been increased from present turnover of Rs 10Lakhs to Rs 25Lakhs or income from present Rs 1.2Lakhs to Rs 2.5Lakhs. It’s a slight relief for individuals and HUF’s.

4. Simple one page return for people with an annual income of Rs 5Lakh other than business income.

5. People filing I-T returns for the first time will not come under any government scrutiny.

6. For revision of return, time period has been reduced to twelve months from completion of financial year at par with the time period of filing of return

7. With regard to Capital Gain tax, holding period has been reduced from 3 years to 2 years for transfer of immovable property. It has also been proposed to shift the base year of indexation from 1 April 1981 to 1 April 2001 for all classes of assets including immovable property.

8. Restriction on cash transactions:

a) transactions above Rs 300,000/- should be done through an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account and not in cash.
b) any payment in cash above Rs 10,000/- (present limit Rs 20,000/-) to a person in a day, shall not be allowed as deduction in computation

9. There is a big and rewarding relief to the small and medium sized enterprises which account for 96% of our industry. Income tax rate has been reduced from 30% to 25% with turnover up to Rs. 50Crores. It’s a boost to SME’s & MSME’s sector.

10. There is a big relaxation for the small and medium tax payers who opt for presumptive taxation scheme. If their turnover is below Rs. 2Crore they can compute their deemed or presumptive income @6% (present rate 8%), provided the receipts are in digital or banking means.

Also, those who opt for presumptive taxation scheme shall be liable for get his books of accounts audited if the turnover exceeds Rs.2Crore.

11. Section 79 of the Income Tax Act, 1961 allows for carry forward of losses of a company for seven years and then set-off against the profits of the future years. However, there was a restriction on carry forward and set-off of losses if 51% of shareholding didn’t remain intact in the year of loss and in the year of set-off.

But, in respect of carry forward of losses for start ups, the condition of continuous holding of voting rights of 51% has been relaxed as long as the original investment of the promoter is not diluted. Not only that, the profit linked exemption available for 3 out of 5 years has been changed to 3 out of 7 years.

Start-up

Start-up means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25Crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Some essential points to be considered are:
a. Such an entity should not be formed by splitting up or reconstruction of a business already in existence
b. The entity shall cease to be a ‘Start-up’ if its turnover for the previous financial years has exceeded INR 25Crores or it has completed 7 (present 5) years from the date of incorporation/ registration.
c. Start-up shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.
For more details and information visit http://www.startupindia.gov.in/