Browse Month: February 2017

Corporate Benefit after Budget

 

Impact of Budget-2017 on Companies & LLP/Partnership Firms

  • Budget 2017 has given companies an advantage over partnership and Limited
    Liability Partnership in terms of Income Tax
  • The maximum marginal tax rates including surcharge will be lesser in
    Companies in comparison to LLP/Partnership Firm after Budget-2017.
  • As per the new budget 2017, the corporate tax on companies has been reduced
    from 30% to 25% though the tax on LLP/Partnership remains same i.e. 30%.

Applicable Tax Rate on Companies & LLP/Partnership Firms

Advantages Of Companies Apart From Taxation Point Of View

Restriction on payment of Salary and Interest to Partner when compared to
Company

  • Limit Partners to draw salary, remuneration and interest from partnership/LLP whereas there are no Limit on payment of
    Salary/Remuneration to Directors.
  • The formula is given in Income Tax under Section 40(b) which defines maximum amount which can be given to partners and
    claimed as expenses for partnership firm and LLP.
  • Following are the Limits:-

Dividend Distribution Tax

Dividend distribution tax is the tax levied by the Indian Government on
companies according to the dividend paid to a company’s investors. At
present the dividend distribution tax is 15%. However many closely
held companies instead of declaring dividend they pay Salary and
remuneration to directors to avoid paying DDT.

Formation and Other cost

The cost for formation of Company is bit higher than compared to partnership and
LLP. However it is one time cost and can be adjusted against the tax benefit it
receives over LLP and partnership.

Other Benefits

  • ✓ Company has Limited Liability when compared to partnership Firm
  • ✓ Better Corporate Governance
  • ✓ Easy Succession Planning and expansion
  • ✓ Separate Legal Entity as compared to Partnership Firm

Conversion OF LLP into Private Limited Company

Before filing application for conversion, please ensure the followings:

  • That secured creditors have given their consent for such conversion;
  • A notice in newspaper about such conversion, one in English and in vernacular language seeking objections must be
    published;
  • There are minimum seven or more members in the existing LLP for converting the LLP into a Company.
  • A general meeting must be held where majority of partners have given their consent for such conversion.

Procedure to be followed for Conversion:

  • Apply for DIN in DIR-3- In case members ought to be directors;
  • Apply for Name approval in form INC-1-The name once approved by the authority is valid for 60 days;
  • File eform URC-1- for conversion;
  • File eForm INC 7- For declaration of compliance;
  • File eForm INC 22- For registered office address; and
  • File eform DIR 12- For appointment of Directors

New Budget Highlights 2017


1.INDIVIDUALS

  • Existing tax rate for personal income of INR 2.5 – 5 lakhs reduced from 10% to 5%
  • 50% tax savings if a person is earning less than INR 5 lakhs
  • 10% surcharge to be levied on annual income from INR 50 lakhs – 1 Crore
  • 87A Rebate decreased from INR 5000 to INR 2500
  • Dividend Income taxable @ 10% if exceeds Rs 10 Lakhs, except for domestic companies or trust or institution or fund registered under
  • section 12AA or referred to in section 10(23C).
  • Simple one-page form to be filed as Income Tax Return – if taxable income other than business income is up to 5 lakhs
  • Levy of Additional Fees Max to 10000 for delay in Return Filling.
  • LIC to issue pension with 8% return
  • Once in A Year TDS @ 5% to be deducted on Rent Paid beyond 50000 P.M.
  • Restriction on set off of loss from house property to Rs 2 lakhs
  • Indexation benefit to be obtained from 1/4/2001 instead of 1/4/1981
  • Holding period for immovable property for LTCG reduced to 2 years

2. BUSINESS/PROFESSION

  • Corporate tax of 25% on Domestic Companies with turn over less than the INR 50 Crore
  • MAT credit can be availed up to 15 years
  • No Cash transaction above INR 3 lakhs, Penalty may be Levi able.
  • Allowable cash limits for cash payments reduced from INR 20,000 to INR 10,000 for all revenue and capital expenditure
  • No major changes under indirect taxation
  • Allocation to Make in India Schemes to be increased
  • A tax return can be revised in 12 months from completion of F.Y
  • For turnover up to INR 2 Crores, presumptive income is reduced from 8% to 6% for turnover which is by non- cash means
  • Maintenance of book of accounts for individual & HUF, if annual turnover is 25 lakhs (what about Professionals)

3. OTHER IMPORTANT ANNOUNCEMENTS

  • FIPB to be phased out
  • A new ETF with diversified CPSE stocks and other Government holdings to be launched in 2017-18
  • By 2019, all coaches of Indian Railways will be fitted with bio toilets
  • New Metro policy to be announced
  • Tier 2 airports infrastructure to be taken under PPP mode
  • A proposal to mandate all government receipts through digital means, beyond a prescribed limit, is under consideration
  • Strategic crude oil reserves proposed to be set up at 2 more locations
  • Head post office to issue PASSPORTS<
  • Introduction of a system to measure annual learning outcomes in schools
  • Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) to be launched
  • Next phase of Skill Strengthening for Industrial Value Enhancement (STRIVE) to also be launched in 2017-18
  • A scheme for creating employment in the leather and footwear industries along the lines in Textiles Sector to be launched