A Breakdown of the Union Budget 2017

By CA Varun Nirmal

2 min read

The Union Budget 2017 for India was presented on February 1, 2017. This is the first budget after the demonetisation drive of the Indian government, which has happened in November 2016. The expectations were very high from this budget for corporate and individual taxes, who expected incentives for moving to digital infrastructure and also some relief for India’s burgeoning middle class.

In the current budget, the finance minister has put huge importance on moving to a digital economy. There are various proposals impacting small businesses and Individuals in this budget as well. This is also the first time when Rail Budget is merged with the Union Budget 2017.

Few of the key proposals likely to impact Individuals and businesses for the financial year 2017-18 are:

Income Tax

  • Corporate Income Tax rates have been reduced from 30% to 25% for all the companies having turnover of less than Rs.50 crore
  • Individual tax slabs has remained unchanged. However the tax rate for Income Tax has been reduced from 10% to 5% for individuals having taxable income in the range of Rs.2.5 lakhs to 5 lakhs per annum
  • Surcharge of 10% on individuals with income between Rs.50 lakhs to 1 crore while a 15% surcharge on individuals with income over 1 crore
  • Income Tax audit limit has been raised from Rs.1 crore to Rs.2 crore ( for traders), and Rs.50 lakhs for professionals
  • For capital gain calculation, the period of holding of assets for the calculation of long term capital gain has been reduced from 3 years to 2 years.
  • As a business owner, if your turnover is less than Rs.2 crores, you can opt for 6% profits as taxable income if all the sales/receipts are through digital mode
  • Threshold limit for maintenance of books of accounts has been raised from Rs.10 lakhs to Rs.25 lakhs

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  • Government is trying to bring more individuals to tax net. With that intent, a new one page Income Tax Return form will be introduced for individuals having income other than business income of up to Rs.5 lakhs
  • Limit of cash transactions reduced to Rs.10,000 from existing Rs.20,000.
  • Base year for indexation for long term capital gain tax calculation now changed to 2001 instead of 1981
  • Trust can accept donations maximum up to Rs.2000 instead of Rs.10,000 from one person
  • Time limit for revising Income Tax Return reduced to 12 months from end of financial year
  • MAT credit can be carried forward for 15 years instead of existing 10 years
  • Professional can pay advance tax in one instalment instead of four, if the turnover is below Rs.50 lacs

Indirect Tax

Government is committed to roll out GST in July 2017 and the efforts are already being made for transition to the new system. India government will start nationwide programs from April 2017 to help and educate Small and Medium Businesses migrate smoothly to the new system. Since Service Tax and Excise are going away with GST implementation, no major changes are scheduled in Indirect Taxes

Thrust on digital payments

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  • Government will launch two new schemes to promote BHIM app among businesses and individuals
  • IRCTC Service charges has been waived off
  • No cash transaction above Rs.3 lakhs is allowed
  • Aadhar Pay, a merchant enabled payment system will be launched shortly
  • Government planning to enable 20 lakhs Aadhar Pay POS by September 2017

Overall, from a business perspective it was a budget focusing on bringing more Individuals in tax net, rationalise the tax for existing tax payers, and move towards a digital environment, which will in turn make them ready for GST as well.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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