Vital points for AY 2018-19 return filing

The Countdown has begun, we all are engaged with the process of finalizing the books of accounts for the financial year 2017-18, and after that representation of our income and payment of tax on thereto has to be made to the government of what government is waiting for. Deadline is not far away and we all are aware of the fact that the computation of the Income and the payment of the tax thereto is guided by the provisions and the rules of the Income Tax Act, 1961.

The Amendments to the Act is of what our honorable finance minister has enumerated in his Budget Speech. I have tried to compile the key amendments that are to keep In mind which is applicable for the filing of the Income Tax return for the previous year 2017-18(the Assessment Year 2018-19). So, here are the key points you must keep in your mind while filing of the Income Tax return.

Tax Rates for the AY 2018-19

A. For Individual and HUF

B. For Companies

1. Domestic Companies:

Turnover of Gross Receipts of PY 2015-16 up to 50 Crore:

1. Up to Rs. 50 Crore: 25%
2. Otherwise: 30%

2. Foreign Companies - 40%

3. Surcharge:

Total Income                                         Domestic Co.                    Foreign Co.

- More Than 1 Crore up to 10 Crore       7%                                     2%
- More Than 10 Crore                             12%                                    5%

C. Rebate under Section 87A

An Assessee being an Individual Resident In India whose total income does not exceed Rs 3,50,000 shall be entitled to a deduction , from the amount of income tax on his total income of an amount equals to 100% of such income tax or

an amount of Rs 2,500 whichever is less.              

- An Important Circular:

A person born on 1St April would be considered to have attained a particular age on 31st March, the day preceding the anniversary of his birthday. In particular the question of eligibility being a senior, very senior citizen would be decided on the basis of above criteria.

Chargeability under the Head Capital Gains

Section 45(5A): Specified Agreement:

Notwithstanding anything contained in sub-section 45(1), where the capital gain arises to an assessee, being an individual or a Hindu undivided family, from the transfer of a capital asset, being land or building or both, under a specified agreement, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority; and for the purposes of section 48, the stamp duty value, on the date of issue of the said certificate, of his share, being land or building or both in the project, as increased by the consideration received in cash, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset :

Provided that the provisions of this sub-section shall not apply where the assessee transfers his share in the project on or before the date of issue of the said certificate of completion, and the capital gains shall be deemed to be the income of the previous year in which such transfer takes place and the provisions of this Act, other than the provisions of this sub-section, shall apply for the purpose of determination of full value of consideration received or accruing as a result of such transfer.

Explanation. - For the purposes of this sub-section, the expression 

(i)  "competent authority" means the authority empowered to approve the building plan by or under any law for the time being in force;

(ii) "specified agreement" means a registered agreement in which a person owning land or building or both, agrees to allow another person to develop a real estate project on such land or building or both, in consideration of a share, being land or building or both in such project, whether with or without payment of part of the consideration in cash;

(iii)  "stamp duty value" means the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of an immovable property being land or building or both.]

Key Point:

Year of Chargeability shall be year in which certificate of completion of the whole or a part of the project is issued by the competent authority.

Shifting of Base Year.

Base year has been shifted to 01-04-2001.

1. CII for the FY 2001-02 is 100
2. CII for the FY 2017-18 is 272.

Period of Holding :

Section 2(42A) defines a short term capital asset to mean a capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer.

However in the case of :

- Any security (other than a unit) listed on a recognized stock exchange in India or
- A unit of Unit Trust of India or
- A unit of an equity oriented fund or
- A Zero Coupon Bond

the period of holding should be 12 Months of less to qualify as short term capital asset.

Further in case of Share of companies not Listed on any stock exchange in India or an Immovable property ( being Land or Building  or both), holding period should be 24 Months or less to qualify as Short Term Capital Asset.

Note : Immovable Property, being land or building to both ( located in India or in Foreign country)

Exemption under section 10(38):

Exemption on equity shares is available if the shares are sold:

• were acquired before 01-10-2004 in any manner,
• were acquired on or after 01-10-2004 and STT was paid on acquisition of these shares

Section 50CA :[Special provision for full value of consideration for transfer of share other than quoted share]

Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being share of a company other than a quoted share, is less than the fair market value of such share determined in such manner as may be prescribed, the value so determined shall, for the purposes of section 48, be deemed to be the full value of consideration received or accruing as a result of such transfer.

Explanation. - For the purposes of this section, "quoted share" means the share quoted on any recognized stock exchange with regularity from time to time, where the quotation of such share is based on current transaction made in the ordinary course of business.

Amendment to Section 45(3):

If Unlisted shares are transferred by the partners, members to firm / AOP, BOI, then section  50CA shall apply and if the FMV is more than the amount recorded in the books of accounts than FMV shall be taken as a sales price.

Amendment to section 47: Transactions not regarded as a transfer:

47(viiaa) : Any Transfer, made outside India, of capital asset being Rupee denominated bond of an Indian company issued outside India, by a non –resident to another nonresident shall not be regarded as transfer.

47(xb): Any Transfer made by way of conversion of preference shares into equity shares of that company shall not be regarded as transfer.

Chargeability under the Head Other Sources:

Section 56(2)(x):

Prior to the introduction of the Finance Act, 2017, gifts received by, specified assets purchased at a lower price were taxable under section 56 (2) (vii). Finance Act, 2017 has extended its applicability for these provisions to all assesses by introducing section 56(2)(x).

Further, it has been clarified that transactions referred under section 47 are not subject to 56(2)(X).

Chargeability under the head Profits and Gains of Business or Profession:

where the assessee incurs any expenditure for acquisition of an asset or part thereof in respect to which payment or aggregate payments made to a person in a day, otherwise than by an account payee cheque/draft/ electronic clearing statement exceeds Rs 10000/-, such expenditure shall be ignored for the purpose of determination of actual cost.

Such expenditure shall not be eligible for the deduction under section 35AD also.

Section 40A(3):

Where the assessee incurs any expenditure for acquisition of an asset or part thereof in respect to which payment or aggregate payments made to a person in a day, otherwise than by an account payee cheque/draft/ electronic clearing system exceeds Rs 10000/- such expenditure shall not be allowable.

Section 44AA: Maintenance of Accounts by a certain person carrying on the business or profession:

- Section 44AA shall be applicable on the Individual/ HUF carrying on business or profession if Total Income exceeds Rs. 2,50,000 or

- Total Sales Turnover, Total Gross receipts exceeds Rs 2,50,000

- In any of the 3 immediately preceding years.

Section 44AB Requirement of the  Tax Audit to a person opted for a presumptive scheme under section 44AD:

Every person,-

i.  carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or

ii. carrying on profession shall if his gross receipts in profession exceed [fifty] lakh rupees in any previous year; or

iii. carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or

iv. carrying on the [profession] shall, if the profits and gains from the [profession] are deemed to be the profits and gains of such person under section 44ADA and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his profession and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year; or

v. carrying on the business shall if the provisions of sub-section (4) of section 44AD are applicable in his case and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

vi. get his accounts of such previous year audited by an accountant before the specified date and furnish by that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :

Provided that this section shall not apply to the person, who declares profits and gains for the previous year in accordance with the provisions of sub-section (1) of section 44AD and his total sales, turnover or gross receipts, as the case may be, in business does not exceed two crore rupees in such previous year:

Amendment to section 44AD: Substitution of Eight percent to Six percent in the following case, Provision enacted as follows:

Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" :

[Provided that this sub-section shall have effect as if for the words "eight per cent", the words "six per cent" had been substituted, in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account during the previous year or before the due date specified in sub-section (1) of section 139 in respect of that previous year.]

Tax Deductible at Source ( TDS) and Tax Collection at Source( TCS):

Section 194IB:[Payment of rent by certain individuals or Hindu undivided family]

Any person, being an individual or a Hindu undivided family (other than those referred to in the second proviso to section 194-I, responsible for paying to a resident any income by way of rent exceeding Rs.50000/- for a month or part of a month during the previous year, shall deduct an amount equal to 5 percent of such income as income-tax thereon.

 The income-tax referred to in sub-section (1) shall be deducted on such income at the time of credit of rent, for the last month of the previous year or the last month of tenancy, if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

 In a case where the tax is required to be deducted as per the provisions of section 206AA, such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

Explanation.- For the purposes of this section, "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.]

Section 194IC: [Payment under a specified agreement as specified under section 45(5A) of the Act.]

Notwithstanding anything contained in section 194-IA, any person responsible for paying to a resident any sum by way of consideration, not being consideration in kind, under the agreement referred to in sub-section (5A) of section 45, shall at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon.

Section 206CC.A requirement to furnish Permanent Account number by collectee.

Notwithstanding anything contained in any other provisions of this Act, any person paying any sum or amount, on which tax is collectible at source under Chapter XVII-BB (herein referred to as collectee) shall furnish his Permanent Account Number to the person responsible for collecting such tax (herein referred to as collector), failing which tax shall be collected at the higher of the following rates, namely:-

(i) at twice the rate specified in the relevant provision of this Act; or

(ii) at the rate of five percent.

No declaration under sub-section (1A) of section 206C shall be valid unless the person furnishes his Permanent Account Number in such declaration.

In case any declaration becomes invalid under sub-section (2), the collector shall collect the tax at source in accordance with the provisions of sub-section (1).

No certificate under sub-section (9) of section 206C shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

The collectee shall furnish his Permanent Account Number to the collector and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

Where the Permanent Account Number provided to the collector is invalid or does not belong to the collectee, it shall be deemed that the collectee has not furnished his Permanent Account Number to the collector and the provisions of sub-section (1) shall apply accordingly.

The provisions of this section shall not apply to a non-resident who does not have a permanent establishment in India.    

Explanation.- For the purposes of this sub-section, the expression "permanent establishment" includes a fixed place of business through which the business of the enterprise is wholly or partly carried on.

Set off or Carry Forward and Set off of Losses:

Amendment to section 71(3): Set off Loss under the head Income from House Property as follows:

Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head "Income from house property" is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds two lakh rupees, against income under the other head.

Section 79

Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year,-

in the case of a company not being a company in which the public are substantially interested and other than a company referred to in clause (b), no loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, unless on the last day of the previous year, the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred;

in the case of a company, not being a company in which the public are substantially interested but being an eligible start-up as referred to in section 80-IAC, the loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, if, all the shareholders of such company who held shares carrying voting power on the last day of the year or years in which the loss was incurred,-

 (i)  continue to hold those shares on the last day of such previous year; and

 (ii)  such loss has been incurred during the period of seven years beginning from the year in which such company is incorporated:

Provided that nothing contained in this section shall apply to a case where a change in the said voting power and shareholding takes place in a previous year consequent upon the death of a shareholder or on account of transfer of shares by way of gift to any relative of the shareholder making such gift:

Provided further that nothing contained in this section shall apply to any change in the shareholding of an Indian company which is a subsidiary of a foreign company as a result of amalgamation or demerger of a foreign company subject to the condition that fifty-one per cent shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company:

“Come out from the practice of filing of Belated Returns because if you missed a deadline this time it will cost you and  cause you more”:

a.  Exemption to following class of persons shall not be available:

1. Section 139(4A): Charitable and Religious Trust or Institution 
2. Section 139(4B) : Political Parties
3. Section 139(4c) Specified Institutions: Hospital, Medical Institutions, Colleges and other specified institutions mentioned under section 10.

b. Fees/ Penalty:

Section 234F: Fees for default of furnishing the return under section 139(1) including section 139(4A), 139(4B), 139(4C), 139(4D), 139(4E),  by way of sum of,-

(a) Rs.5000/-if the return is furnished on or before the 31st day of December of the assessment year;

(b) Rs.10000/- in any other case:

Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

Note: The provisions of this section shall apply in respect of the return of income required to be furnished for the assessment year commencing on or after the 1st day of April 2018.

Self Assesement Tax under section 140A after introduction of 234F would be as follows:

Note:  Where the Self Assessment tax is paid less as the amount required to be paid under section 140A, then the amount so paid shall be first adjusted towards the interest and fees under section 234F and balance towards the tax.