Conversion of preference shares into equity not treated as transfer, changing capital gains treatment from assessment year 2018-19.
The Finance Bill, 2017 adds a new clause excluding conversion of preference shares into equity of the same company from the definition of transfer for capital gains purposes. This amendment, aligning preference-share conversion with existing non-transfer treatment for bond or debenture conversions, takes effect from 1 April 2018 and applies to assessment year 2018-19 onward.

Capital gains exemption for non resident rupee bonds: transfers outside India between non residents not treated as transfer.
The Bill inserts a provision that any transfer made outside India of a capital asset consisting of a rupee denominated bond of an Indian company issued outside India, where both transferor and transferee are non residents, shall not be regarded as transfer for capital gains purposes; this change complements existing non recognition for conversion of bonds into shares and applies prospectively from the operative year specified in the Bill.

Capital gains timing under specified development agreements: tax charged when project completion certificate is issued, using stamp duty value.
Section 45 is amended by inserting section 45(5A) to tax capital gains of individuals and HUFs from transfers of land or building under specified agreements in the previous year when the competent authority issues the project completion certificate; the stamp duty value of the assessee's share on that date, increased by any cash consideration, is deemed the full value of consideration. If the assessee transfers the share on or before that certificate date, capital gains are taxable in the year of that transfer and general provisions (excluding section 45(5A)) apply to determine full value. The amendment defines key terms and takes effect from 1 April 2018.

Deemed profit rule change - lower presumptive rate for receipts received through banking channels, other receipts remain at higher rate.
Amendment inserts a proviso reducing the deemed total income rate under the presumptive taxation regime for the portion of turnover or gross receipts received by account payee cheque, account payee bank draft or electronic clearing through a bank account during the previous year or by the return due date; the original rate continues to apply to receipts received by other modes. The change takes effect from the fiscal start date and applies to the specified assessment year and subsequent years.

Audit threshold increase for presumptive taxation reduces audit applicability where turnover does not exceed prescribed limit.
A proviso to the tax audit requirement exempts persons who declare profits under the presumptive taxation scheme and whose total sales, turnover or gross receipts do not exceed the revised turnover ceiling, thereby narrowing the class required to obtain an audit when they comply with sub section (1) of the presumptive taxation provision. The amendment is effective from 1 April 2017 for the relevant assessment year and subsequent years.

Maintenance of books obligation raised for individuals and HUFs, reducing the number required to keep accounts under tax law.
The amendment raises the monetary thresholds triggering the maintenance of books and documents for individuals and Hindu undivided families: income threshold increased from one lakh twenty thousand rupees to two lakh fifty thousand rupees, and total sales/turnover/gross receipts threshold increased from ten lakh rupees to twenty five lakh rupees; the change applies from 1 April 2018 for assessment year 2018 19 and onward.

Interest income recognition on bad debts: cooperative banks aligned with accrual-or-receipt tax treatment for recovered interest.
Amendment extends the rule that interest on certain bad or doubtful debts is taxable in the year it is credited to profit and loss or actually received, whichever is earlier, to co-operative banks while excluding primary agricultural credit societies and primary co-operative agricultural and rural development banks; it also adds in-section definitions of those terms and specifies a prospective operative date applying to the indicated assessment year and subsequent years.

Deductibility of interest: interest on co-operative bank borrowings allowed only on actual payment, with specified exclusions.
Interest on loans or advances from co-operative banks will be allowable as a deduction only if actually paid on or before the due date of filing the return for the relevant previous year; exclusions apply to primary agricultural credit societies and primary co-operative agricultural and rural development banks, and statutory definitions for those terms are incorporated to define scope and application prospectively.

Actual cost adjustment for assets subject to investment-linked deduction reduces cost by allowable depreciation, altering basis for deemed income.
The proviso to Explanation 13 provides that where a capital asset in respect of which deduction or part of deduction was allowed under section 35AD is deemed to be the assessee's income under sub section (7B), the asset's actual cost shall be the actual cost reduced by an amount equal to depreciation calculated at the rate in force that would have been allowable had the asset been used for business since acquisition.

Restriction on cash payments for capital expenditure conditions recognition of actual cost and depreciation claims on payment mode compliance.
Amendment adds a proviso to section 43(1) that excludes from the actual cost for depreciation any expenditure on acquisition of an asset where payments to a person in a day exceed a specified cash threshold unless made by account-payee cheque, account-payee bank draft or electronic clearing system through a bank account, thereby conditioning depreciation eligibility on permitted modes of payment.

Restriction on deduction for specified domestic transactions removes arm's length deduction and subjects payments to disallowance rules.
The Finance Bill 2017 amends section 40A to withdraw automatic deductibility for payments under specified domestic transactions made at Arm's Length Price; such payments are now subject to the disallowance rules of section 40A(2). The amendment also alters the proviso to clause (a) of sub section (2) consequential to the transfer pricing provision, aligning domestic specified transaction treatment with the transfer pricing framework and applying retrospectively as provided in the Bill.

Restriction on cash payments: non banked payments above the prescribed limit are nondeductible and may be taxable.
Amendment lowers the cash payment threshold for deductibility from twenty thousand rupees to ten thousand rupees per person per day and requires payments above that limit to be made by account payee cheque, account payee bank draft, or electronic clearing through a bank account; amounts paid otherwise will be disallowed as deductions or deemed to be profits and gains of business or profession. Consequential changes to related sub provisions are also proposed, effective 1 April 2018 for the relevant assessment year.

Provision for bad and doubtful debts limit increased, expanding allowable bank deduction for relevant assessment years.
The amendment raises the deduction ceiling for provision for bad and doubtful debts under section 36(1)(viia)(a) from seven and one-half per cent to eight and one-half per cent of total income (computed before deductions under the clause and Chapter VIA), while retaining the separate ten per cent cap linked to aggregate average advances of rural branches; it applies to specified scheduled, non-scheduled and cooperative banks and takes effect from 1 April 2018 for assessment year 2018-19 onward.

Cash payment restriction on deductions: disallows deduction where daily payments to a person exceed the permitted cash threshold unless paid by account payee or electronic system.
The amendment disallows capital-expenditure deductions for specified business where payments (or aggregate payments to a person in a day) are made otherwise than by account payee cheque, account payee bank draft, or electronic clearing system through a bank and exceed the prescribed cash threshold, expanding the existing exclusion alongside acquisitions such as land, goodwill, and financial instruments.

Relief from notional rental income: annual value treated nil for builder stock in trade unsold after one year post completion.
The annual value of a building and land held as stock-in-trade by a builder or developer shall be taken as nil where the property or any part is not let, for the period up to one year from the end of the financial year in which the certificate of completion is obtained from the competent authority, thereby excluding notional rental income for that post-completion period.

Cash donation limits for political parties restrict non-bank payments; mandatory tax return filing required for exemption.
Eligibility for political party tax exemption is conditioned on banning donations above a prescribed cash threshold except when received by bank cheque, bank draft, electronic clearing or by electoral bond, and on timely furnishing of the income-tax return for the previous year; electoral bond contributions are excluded from the standard donation-reporting requirement and a statutory definition of electoral bond is introduced.

Filing requirement for tax exemption: timely income-tax return now mandatory to claim exemptions under sections 11 and 12.
A new clause (c) in subsection (1) of section 12A makes timely filing of the return of income referred to in subsection (4A) of section 139 a condition for claiming exemptions under sections 11 and 12; the amendment applies prospectively from the stated commencement and to the specified assessment year and subsequent years.

Registration requirement for trusts: amended objects not conforming to original registration must seek fresh 12AA registration within thirty days.
Where a trust or institution registered under section 12AA or earlier section 12A adopts or modifies its objects so they no longer conform to registration conditions, it must apply for registration in the prescribed form and manner within thirty days of such adoption or modification and be registered under section 12AA to qualify for sections 11 and 12 exemptions.

Corpus-directed contributions are not treated as application of income under income-tax law, limiting trust deductions.
A new explanation excludes from application-of-income treatment any amount credited or paid out of a trust's income when the contribution is made with a specific direction that it shall form part of the recipient trust's corpus, clarifying that such corpus-directed transfers will not count as application of income for charitable or religious purposes while preserving existing rules for accumulated-income transfers.

SEZ deduction under section 10AA limited to the assessee's computed total income, preventing deduction beyond taxable income.
The amendment inserts an Explanation specifying that the SEZ-unit deduction is to be allowed from the assessee's total income computed under the Income-tax Act before giving effect to that special deduction, and that the deduction shall not exceed such total income; the change is made to address a judicial ruling on the stage of deduction.