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Rashmin Sanghvi & Associates

Chartered Accountants

220, 2nd Floor, Arun Chambers,
Tardeo Road,
Mumbai - 400 034,
Maharashtra, India.

Tel. Nos.: (+91 22) 2351 1878, 2352 5694.

Fax : (+91 22) 2351 5275.

Email : [email protected]

 
Home Articles Taxation         Share :

Budget 2017Chapter H

40. Rates of Income tax:

40.1 Corporate Tax Rates:

In the 2015 Budget speech, the Finance Minister had proposed to bring down corporate tax to 25% in the next 4 years combined with removal of tax exemptions. He had made a beginning last year by lowering the tax rate to 29% for new companies which declare not to avail any deductions or exemptions.

In this year’s Finance Bill, rate of tax in case of domestic companies has been reduced from 30% to 25% provided total turnover or gross receipts of the company do not exceed Rs. 50 crores for FY 2015-16.

A similar provision was introduced in Finance Act, 2016. However, the provision of Finance Act, 2016 was applicable only to domestic companies incorporated on or after 1st March 2016. Furthermore, there are certain conditions like companies should not claim investment linked deductions, set-off any losses, etc. Also once this option is selected it cannot be subsequently withdrawn for any of the years.

After introduction of amendment by this year’s Finance Bill, it seems that companies incorporated on or after 1st March 2016 and having a turnover of less than Rs. 50 Crores would not like to claim this benefit. Since this year’s amendment does not enforce any other condition other than turnover limit, companies fulfilling these conditions would pay tax for AY 2017-18 at 29% or 30% as applicable.

The rate of 29% introduced last year for corporates with turnover/ gross receipts of Rs. 5 crores and less in FY 2014-15 is now replaced by the above provision.

40.2 Tax Rates for Individuals and HUF:

40.2.1 In case of every Individual and HUF rates of tax for Financial Year 2017-18 are proposed as under:

Person

Income Limits

(Rs.)

Tax Rate (excluding education cess and surcharge)

Individual, HUF

0 – 2,50,000

Nil

2,50,001 – 5,00,000

5%

5,00,001 – 10,00,000

20%

10,00,001 & above

30%

There has been a reduction in lowest slab rate from 10% to 5%. Tax payers shall get a maximum benefit of Rs. 12,500 across all levels of income. However, in order to provide the beneficial rate at the lowest slab, it is proposed by the Finance Bill to levy surcharge for certain tax payers. (See para 40.2.2 below)

40.2.2 As stated above in para 40.2.1, a new surcharge shall be levied in case of individuals earning total income over Rs. 50,00,000. The slab for levy of surcharge is as under:

Person

Income Limits (Rs.)

Rate of Surcharge

Individual, HUF

50,00,001 – 1,00,00,000

10%

1,00,00,001 & above as presently applicable

15%

40.2.3 Marginal relief shall be granted in appropriate cases where income exceeds Rs. 50,00,000 or Rs. 1,00,00,000. Therefore, for tax payers earning above Rs. 50,00,000 total tax outgo may increase even after reduction in tax rate by 5% in the first slab.

40.3 Tax Rates for Foreign Companies, AOP/BOI, Firms, etc.:

There is no change in the income tax rates for foreign companies, AOP/BOI, firms, co-operative societies and local authorities.

40.4 Rebate:

Finance Act, 2013 introduced rebate u/s. 87A for individuals whose total income did not exceed Rs. 5,00,000. The rebate amount upto FY 2015-16 was 100% of tax or Rs. 2,000 whichever is lower. With a view to provide relief to small tax payers the limit of Rs. 2,000 was increased to Rs. 5,000/- by Finance Act, 2016.

The tax rates for individuals earning income between Rs. 2,50,000 and Rs. 5,00,000 is proposed to be reduced by 5% as mentioned above. As the tax payable will be reduced, the Finance Bill 2017 proposes to reduce the maximum rebate amount also to Rs. 2,500. The rebate shall now be lower of 100% of tax payable or Rs. 2,500.

40.5 The tax rates for each type of person for FY 2017-18 are given below:

Person

Income limits

(Rs.)

Tax rate 
(basic rate; surcharge; cess)

Resident - Individual, HUF, AOP, BOI, Artificial juridical person

Upto Rs. 50 Lakhs

Maximum rate 30.9%

(30%; 0%; 3%)

50,00,001 – 1,00,00,000

Maximum rate 33.99%

(30%; 10%; 3%)

Above Rs. 1 crore

Maximum rate 35.54%

(30%; 15%; 3%)

Non-resident - Individual, HUF, AOP, BOI, Artificial juridical person

Upto Rs. 50 Lakhs

Maximum rate 30.9%

(30%; 0%; 3%)

50,00,001 – 1,00,00,000

Maximum rate 33.99%

(30%; 10%; 3%)

Above Rs. 1 crore

Maximum rate 35.54%

(30%; 15%; 3%)

Firm and LLP

Upto Rs. 1 crore

30.9%

(30%; 0%; 3%)

Above Rs. 1 crore

34.6%

(30%; 12%; 3%)

Person

Income limits

(Rs.)

Tax rate 
(basic rate; surcharge; cess)

Indian company

(Turnover or gross receipts do not exceed
Rs. 50 crores in
FY 2015-16)

Upto Rs. 1 crore

25.75%

(25%; 0%; 3%)

Above Rs. 1 crore and upto Rs. 10 crores

27.55%

(25%; 7%; 3%)

Above Rs. 10 crores

28.84%

(25%; 12%; 3%)

Indian company

(Turnover or gross receipts exceed Rs. 50 crores in
FY 2015-16)

Upto Rs. 1 crore

30.9%

(30%; 0%; 3%)

Above Rs. 1 crore and upto Rs. 10 crores

33.1%

(30%; 7%; 3%)

Above Rs. 10 crores

34.6%

(30%; 12%; 3%)

Indian company

(Section 115BA)

Upto Rs. 1 Crore

25.75%

(25%; 0%; 3%)

Above Rs. 1 crore and upto Rs. 10 crores

27.55%

(25%; 7%; 3%)

Above Rs. 10 crores

28.84%

(25%; 12%; 3%)

Foreign company

Upto Rs. 1 crore

41.2%

(40%; 0%; 3%)

Above Rs. 1 crore and upto Rs. 10 crores

42.0%

(40%; 2%; 3%)

Above Rs. 10 crores

43.3%

(40%; 5%; 3%)