Budget 2017 : PWC analysis

I came across this analysis from PWC on the Indian Budget 2017.

I have highlighted certain points which caught my eye

Immediate Benefits of Demonetisation

a) Increase in Bank deposits with a resultant decline in Interest rates

b) Decline in real estate prices

c) Increase in financial system savings

d) Increase in digitilization

e) Increase in income disclosure and the resultant impact on increased revenue collections

Income Declaration Scheme

The Scheme which allows for a one time effective tax rate of 45% on undisclosed income. This has lead to a total collection of around 65,000 crores i.e around 145 thousand crores of previously undisclosed income has now become white.

Direct Tax Dispute Resolution Scheme

Settling retrospective disputes with Indian government.The Scheme waives off interest and penalty if the principal involved in the retrospective taxes are paid.

Budgetary Income Split

Borrowings and other liabilities - 20%

Corporation tax    -  19%

Union excise duties - 15%

Income tax - 14%

Non tax revenue 13%

Service tax and other taxes - 9%

Customs - 8%

Non debt Capital receipts 2%


Budgetary Expense split

Central Sector Scheme - 23%

Other expenditure 22%

Interest payments - 18%

Defence 9%

Centrally sponsored scheme 9%

Subsidies 9%

Finance Commission and others 5%

States shares of taxes and duties 5%

Personal Income tax

The rate of income tax is reduced to 5% from 10% for income between INR 2.5 lacs and INR 5 lacs. This is likely to bring tax saving of around 12,875 INR.

Surcharge

A surcharge of 10% on tax payable is proposed for individuals having an income of INR 50 lakhs to INR 1 crore

Long-term capital asset 

The holding period in respect of immovable properties to qualify as long-term capital asset has been proposed to be reduced to 24 months from 36 months.

The base year for computation of capital gains for old capital assets acquired before 1April, 1981 has been proposed to move to 1 April, 2001. Now the cost of acquisition of assets acquired before 1 April, 2001 shall be allowed to be taken at fair market value as of 1 April, 2001

Domestic company 

Corporate tax rate reduced to 25% (plus applicable surcharge and education cess) for

domestic companies having total turnover/ gross receipts in the previous year (2015-16)not exceeding INR 500 million. In other cases, the tax rates remain unchanged at 30%(plus applicable surcharge and education cess).

It is weird that the Government has not changed the tax rates for partnership firms and LLPs which is still fixed @ 30.9%. I believe 90% of the LLPs would be less than 500 million INR turnover and the Government has made it impossible for them to continue when they can easily convert into a company and get the 5 % tax benefit. Is this an oversight by the Govt or they are now campaigning against them ?

Assessment appeals and other provisions

Reduction in time-limit for revising return of income

The existing provision allows the taxpayer to revise return of income at any time before

the expiry of one year from the end of the relevant assessment year or before the

completion of assessment, whichever is earlier.

In order to expedite assessment, the above time frame for filing revised return has been curtailed. It is now proposed that the taxpayer would be eligible to revise its tax returnonly up to the end of the assessment year or before the completion of assessment,whichever is earlier. 

The proposed amendment shall be applicable w.e.f 01 April, 2018 onwards

Restriction on cash transactions 

As a measure to discourage generation and circulation of black money, insertion of new provisions to curb cash transactions of INR 3,00,000 or more and consequential penalty provisions for contravention of such provisions.

It is proposed to insert a new section 269ST, which will provide that no person shall

receive an amount of INR 3,00,000 or more:

(a) In aggregate from a person in a day;

(b) In respect of a single transaction;

or (c) In respect of transactions relating to one event or occasion from a person

otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.

It is also proposed to insert a new section 271DA to provide for levy of penalty on a

person who receives a sum in contravention of the provisions of the proposed section

269ST. The penalty is proposed to be equal to the amount of such receipt.

The said penalty shall however not be levied, if the person proves that there were good

and sufficient reasons for such contravention.

The proposed amendment shall be applicable w.e.f 1 April, 2017 onwards