The Finance Minister of India presented Budget for 2017-18 to the Parliament on 1 February 2017. Here are the main tax proposals of the Union Budget 2017-2018:

Corporate tax:

  1. The new Budget introduced following concessional tax rate for small and medium-sized domestic companies:
  •  A concessional tax rate of 25% for small and medium-sized domestic companies having an annual turnover of INR 500 million.
  • Domestic companies set up and registered on or after 1 March 2016 that are engaged in the manufacturing or production of articles or things and research with respect to such articles or things can opt for a concessional tax rate of 25%, % if it does not claim any specified tax incentives. In addition, a 7% or 12% surcharge and a 3% cess are imposed on the income tax of such companies.  To avail of this benefit, the taxpayer must exercise the option on or before the due date of furnishing of tax returns and the election cannot subsequently be withdrawn in the same or for any other previous year.
  • Domestic companies earning royalty income from patents developed and registered in India are subject to tax at a concessional rate of 10% (plus applicable surcharge and cess).
  1. A possible tax is imposed on businesses having a turnover of less than INR 20 million, with the exception of those in the business of plying, hiring and leasing goods. If the turnover is received in full through a bank account, a presumptive tax rate of 6% will apply. However, if the turnover is received through any other means, the presumptive tax rate will be set at 8% of the total turnover.
  2. The disallowance for cash expenses exceeding the INR 20,000 threshold applicable to a person on a per-day basis is reduced to INR 10,000.
  3. A new section will be introduced to restrict interest deduction up to 30% of earnings before interest, tax, depreciation and amortization (EBITDA) if the amount of interest paid to non-resident associated enterprises (AEs) exceeds INR 10 million. Banks and insurance companies will be excluded from this ambit.
  4. The holding period for categorizing immovable property as long-term capital assets are reduced from 3 to 2 years.
  5. Foreign portfolio investors (Categories 1 and 2) will be exempt from tax under provisions relating to the indirect transfer of capital assets.
  6. The base year for calculating capital gains will be changed from 1981 to 2001.
  7. Income from the transfer of carbon credit will be taxed at 10% on the gross consideration.
  8. Cash donations to political parties and charitable organizations will be restricted to INR 2,000.
  9. The carry-forward of minimum alternate tax (MAT) credit will be extended from 10 to 15 years.
  10. Loss carry-forward subject to 51% shareholding restriction (under section 79 of the ITA) for eligible start-up companies will be relaxed.

Personal income tax

  • Existing rate of tax for individuals between Rs.  2.5- Rs 5 lakh is reduced to 5% from 10%.
  • All other categories of tax payers in subsequent brackets will get a benefit of Rs 12,500.
  • Simple one page return for people with an annual income of Rs. 5 lakh other than business income.
  • People filing I-T returns for the first time will not come under any government scrutiny.
  • Surcharge of 10% to be levied on individuals with income between Rs.50 lakhs to Rs.1 crore (revenue gain of Rs.2,700 crore).