16th- 31st January 2017
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Budget 2017 – Push or pull to digital economy

Government is trying its every best to make India "A digital Economy". It seems as India is on the edge of a massive digital revolution. Promotion of a digital economy is an integral part of Government's strategy to clean the system and weed out corruption and black money.
There are not many changes in current indirect tax regime as GST is proposed to be rollout on 1st
July, 2017. Hon'ble Finance Minister in today's speech, said that IT system is on schedule for GST implementation and several teams of tax officers are also working tirelessly to give finishing touch to the Model GST law and rules and other details.
To promote cashless transactions, post offices, fair price shops and banking correspondents will be used. Hon'ble finance minister retreated a target of over 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhaar Pay, IMPS and debit cards. These increased digital transactions will enable small and micro enterprises to access formal credit.
Government will also encourage SIDBI to refinance credit institutions which provide unsecured loans, at reasonable interest rates, to borrowers based on their transaction history.
This budget has been welcomed by the whole industry. The Sensex jumped immediately after the speech was over. 
Digital economy budget will be a right move for the future growth of the economy. With more & more digitalization, India would have new taxpayers & better transparency in system. Every stakeholder from a small shop to a big corporate is pushed towards the digital economy. Government has pushed the digital theme in every area of the budget which is a nice effort.
Therefore, this Budget of 2017 is not a pull, but a push to Digital economy. Our government is determined to lay a beautiful foundation of 
digital economy.

Key Highlights of Budget 2017
This is the first time in Indian history that Union Budget has been announced one month in advance. This decision is made to complete the legislative process for approval of annual spending plans and tax proposals before
beginning of the new financial year on April 1.
  -Govt. proposes levy of surcharge of 10% for income between Rs. 50 lakhs and Rs. 1 crores
  -FM proposed no change in Exemption limit but reduces tax rate to 5% for income between 2.5 lac to 5 lacs
  -Threshold limit for audit of entities opting for presumptive taxation under Section 44AD is increased to 2 crores
  -One page ITR form to be introduced for taxpayers with taxable income of up to 5 lakhs except business income: FM
  -FM proposes to reduce basic customs duty on LNG from 5% to 2.5% in 2017-18
  -Govt. proposes carry forward of MAT Credit for a period of 15 years instead of 10 years
  -Capital Gains: Holding period for immovable property is reduced to 2 years
  -More than 90% of FDI are proposed under automatic route
GST to ease loan access for millions of firms using digitalised data.
The implementation of Goods and Services Tax (GST) should drive nearly seven million small businesses to the formal digital economy and help them get easy access to loans, said Nandan Nilekani, the technology entrepreneur and co-founder of Infosys who was tapped by the government to run an ambitious identity-recognition programme, on Friday.
The new unified taxation system, which is scheduled to be implemented later this year, will bring in millions of unorganised businesses on one platform. This would effectively, Nilekani believes, help them get loans
Nilekani pointed out, though the country has over 60 million businesses, fewer than one million are incorporated and only a few thousand are listed. A digital trail through GST would help these firms get access to formal credit at a much lower cost, which would help more small enterprises get into the formal economy.
Nilekani headed the empowered group on information technology infrastructure on GST.
"Digitisation is the basis for credit and credit becomes the attractive reason for businesses to enter the formal economy," he said, adding that 'India's formal economy is small and only 7per cent of the India's employment is in the formal sector.
Input tax credit on ATF: Aviation Ministry suggests ways to compensate airlines

Civil aviation ministry has written to the finance ministry suggesting ways to compensate airlines that will not be able to take input tax credit on aviation turbine fuel (ATF) under the Goods and Services Tax (GST). Since petroleum products including ATF are outside the GST regime for the time being, airlines will not be able utilise credit on taxes paid on ATF - a key input which comprises over 40 per cent Union civil aviation minister Ashok Gajapathi Raju said his ministry has suggested various alternatives to the finance ministry to help compensate airlines that cannot take tax credit on ATF under the GST regime.
"GST is becoming a reality but India is a federal structure. So generally, GST means, they (corporates) would get set-offs for their inputs.Now here
in this federal structure, state governments wants petroleum products to be kept out of it. That generates one type of problem because petroleum and intoxicants, state governments want that out (of GST). Ok, keep that out but then how do they get the set-off, that becomes a double whammy," Raju said.
"The issue has to be identified, flagged and the ministry has flagged it with the finance ministry. They have to take a call on it, what to do, how to go about it. Anywhere between 40-45
per cent of the operating costs are fuel. If fuel is high taxed and that too with no set offs, they will be in trouble," the minister said.

New tax norms target shell firms
The government on Tuesday issued guidelines to plug tax evasion by shell companies or foreign firms set by groups in India to retain income outside the country, dashing hopes of
industryThe rules outline companies incorporated overseas but with effective control of that implementation of these norms would be deferred to next year.The rules will affect companies in industries like pharmaceuticals, automobiles, energy, manufacturing and software. The guidelines have a few safeguards that were not present in draft norms issued in 2015 such as a collegium of officers to vet whether companies are to be taxed on the basis of their place of effective management (PoEM) and test of active business. However, experts warned even then there could be subjectivity in establishing and majority ofboard meeting in India will be considered a tax resident. The rules will not apply to companies with a turnover or gross receipts of ~50 crore or less in a financial year. “The intent is to target shell companies and companies created for retaining income outside India although real control and management of affairs is located in India,” the Central Board of Direct Taxes (CBDT) said in a release. The rules will come into effect from assessment year 2017-18, which essentially means the current financial year. Tax consultants pitched for a deferment raising compliance concerns because the rules were issued in the tenth month of the financial year.
Expanding the coverage of gift transactions
Presently, section 56(2)(vii) covers only two kinds of taxpayers viz. individuals and HUFs. It does not cover other taxpayers such as firms or co-operative societies or companies or trusts who continue to remain outside
the drag net of such provisions.
In spite of such insertion, there were some apparent gaps in the coverage of persons when any sum of money or property is transferred, without consideration or for inadequate consideration.
With the abolition of Gift Tax Act, 1958 from October 1998 there was no check for transfer of assets even between non-relatives till the lawmakers thought it fit to introduce necessary legal checks by way of amending section 56(2) of the Income-tax Act, 1961 through the Finance (No.2) Act, 2004 w.e.f. 01.04.2005.
It is proposed to insert a separate clause (x) to section 56(2) w.e.f. 01.04.2017 to cover those transactions and grandfather section 56(2)(vii), so that all the taxpayers could be treated alike.
Where any person receives any sum of money, without consideration, the aggregate value of which exceeds Rs.50,000 the whole of such sum shall be taxable as income under the head "other sources".
The Finance Bill, 2017 proposes to add clause (x) to section 56(2) and it would operate in respect of transactions hitherto covered by clause (vii) to section 56(2). The scope for abusing the provision by taxpayers other than individual / HUF is now put to rest by making reference to the expression "any person", which would mean all taxpayers covered by section 2(31) of the Act.
Neeraj Bhagat & Company is a team of distinguished chartered accountant, corporate financial advisors and tax consultants in India. Our firm of chartered accountants represents a coalition of specialized skills that is geared to offer sound financial solutions and advices. The organization is a congregation of professionally qualified and experienced persons who are committed to add value and optimize the benefits accruing to clients.

Neeraj Bhagat & Co.
New Delhi, Gurgaon, Mumbai 

Neeraj Bhagat & Co., S-13, St. Soldier Tower, Vikas Puri, New Delhi, 110018 India

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