Payroll and Compliance - The Monthly Chronicle

February 2018

 
 
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Union Budget: Highlights

Finance Minister Arun Jaitley presented the Union Budget 2018 in Parliament on 1 February 2018. This year, the Budget has been focused on agriculture, infrastructure and healthcare reforms in India. There are many infra and agricultural reforms and investment proposal made to support the cause.
Some of the highlights of the Budget impacting the income or taxes of an individual are highlighted below.

 
 

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Personal Tax

 
  • No change in income tax for individuals.
  • In this budget, there is a proposition to add new clause under Section16(ia): Under this clause an individual salaried employee would be eligible for a standard deduction of forty thousand rupees or the amount of the salary, whichever is less, for the purpose of computing the income chargeable under the said head. This introduction of new clause will result in omission of the below section of existing income tax act:
    Section 17(v)(viii)(2): Under this section, an employee can claim exemption for any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family not exceeding fifteen thousand rupees in the previous year.
    Section 10(14) read with Rule 2BB: Under this section, an individual can claim an exemption of Rs.1600 per month for meeting the traveling cost.
    Note: For handicapped people the enhanced allowance of Rs.3200 as transport allowance will continue to be the same.

     
  • Education and health cess on taxes paid is proposed to be levied at 4% (the earlier limit was 3%).
 

Provident Fund

 

Provident Fund

  • For every new woman joining the provident fund scheme, only 8% of Employees’ Provident Fund (EPF) is proposed to be deducted for the first three years of her employment. (The general deduction from salary was supposed to be 12%).
  • In order to encourage employment generation, in this budget government has also proposed to contribute 12 per cent of wages of new employees in employee provident fund for all sectors for the next three years. (The Union government is already implementing the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) scheme under which it pays the employers’ contribution of 8.33% of wages under the Employees’ Pension Scheme in the first three years of hiring a new employee. )
    We are awaiting an official notification from department of Provident fund to understand the process and steps to be adopted by each company to claim such expenses.
 
 
 

Senior Citizens (individuals whose age is more than 60 years)

 
  • No change in income tax for individuals.
  • In this budget, there is a proposition to add new clause under Section16(ia): Under this clause an individual salaried employee would be eligible for a standard deduction of forty thousand rupees or the amount of the salary, whichever is less, for the purpose of computing the income chargeable under the said head. This introduction of new clause will result in omission of the below section of existing income tax act:
    Section 17(v)(viii)(2): Under this section, an employee can claim exemption for any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family not exceeding fifteen thousand rupees in the previous year.
    Section 10(14) read with Rule 2BB: Under this section, an individual can claim an exemption of Rs.1600 per month for meeting the traveling cost.
    Note: For handicapped people the enhanced allowance of Rs.3200 as transport allowance will continue to be the same.

     
  • Education and health cess on taxes paid is proposed to be levied at 4% (the earlier limit was 3%).
  • The 80TTA exemption for interest income on bank and post office deposits has been proposed to be raised to Rs. 50,000 for all senior citizens (the earlier limit was Rs. 10,000). Also, no TDS will be deducted under section 194A on any interest from all fixed deposit schemes and recurring deposit schemes.
  • The 80D limit for claiming insurance premium payment has been proposed to be increased to Rs. 50,000 (the earlier limit was Rs. 30,000)
  • Section 80DDB deduction has been proposed to be increased for medical expenditure for certain critical illnesses for all senior citizens and very senior citizens up to Rs. 1,00,000 (earlier, the limit was Rs. 60,000 in case of senior citizens, i.e. individuals more than 60 to 80 years, and Rs. 80,000 in case of very senior citizens, i.e. individuals whose age is more than 80 years).
  • The investment scheme under Pradhan Mantri Vaya Vandana Yojana has been proposed to be extended up to March 2020.
 
 
 

Capital Gains on Sale of Shares

Currently, long-term capital gains (LTCG) from the sale of equity shares and equity-oriented mutual funds on which securities transaction tax (STT) has been charged on sell transactions are completely exempt from tax. In this year’s budget, there is a proposition to re-introduce long-term capital gains tax on gains arising from the transfer of listed equity shares exceeding Rs 1 lakh at 10%, without allowing any indexation benefit. Short-term capital gains arising due to transfer of shares within 12 months will continue to be taxed at 15%.
 

 
 
 

Corporate tax & Other taxes:

  • There is a preposition to reduce Ccorporate tax rate for companies whose turnover is less than Rs.250 crore to 25% (earlier the tax rate was 30%)
  • Currently any dividends received from all mutual funds are tax-free in the hands of the investors. In this years’ there is a proposal to introduce a tax on distributed income by equity-oriented mutual funds at the rate of 10 percent, to provide a level field across growth oriented and dividend distributing schemes.
  • Any income earned by farm cooperatives is proposed to be 100% exempt from taxes. Also this benefit of 100% tax exemption would be extended to companies registered as farmer producer companies with a turnover of Rs 100 Crore and above.
  • Government has also proposed labour reform with an approach to encourage and generate fixed-tenure employment or contract jobs. The details of the scheme is attached in the below article.
 
 
 

New Labour Employment Policy Reform

The Union government is drafting a new set of proposed labour reform with an approach to encourage and generate fixed-tenure employment or contract jobs.
The draft notification on fixed-term contracts is part of the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, and enables companies to hire workers for short-term assignments and terminate their services when projects are completed. The move, once implemented, is expected to allow for “free labour movement” and promote a hire-and-fire policy, overriding the existing retrenchment requirements. The draft policy is now open for discussion at the central government forum.

Currently, fixed-term employment is only allowed in the apparel manufacturing sector. The cabinet had recently said it could be extended to footwear, leather and the accessories sector to help "attract large-scale investments at a global scale."
 

 
 

Telangana & Haryana LWF payment amendment

Telangana & Haryana LWF payment has been made online from December 2017. From December 2017 onwards there will be no cheque/DD payment would be accepted for payment purpose.

 
 
 
Compliance Calendar for the month of February, 2018
Due date Nature of transaction Existing rules Mode
Professional Tax - States - Remittances
10th February 18 Andhra Pradesh & Madhya Pradesh State-wise regulations By Challan
15th February 18 Gujarat Gujarat PT regulations By Challan
20th February 18 Karnataka Karnataka PT regulations By Challan & Online
21st February 18 West Bengal West Bengal PT regulations By Challan
28th February 18 Assam & Orissa State-wise regulations By Challan
28th February 18 Maharashtra Maharashtra PT regulations Online
 
PF Central
15th February 18 Remittance of Contribution EPF & MP Act, 1952 Online
ESI Central
15th February 18 Remittance of Contribution (Main code and Sub codes) ESIC Act, 1948 Online
TDS
7th February 18 TDS Payment Income Tax Act, 1961 Online
Labour Welfare Fund Remittances
5th February 18 Kerala (Labour Welfare Fund Act) Kerala State Labour Welfare Fund Offline
 
 
 
 
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Sources: Government Notifications, Circulars, Press releases.

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