By Nimisha Khattar & Tushar Abhyankar
Before the budget was due, speculations were rife that the Union Budget of 2017 will bring relief to the taxpayers especially individuals. The move was correctly guessed so, as this budget brought a reduction in taxes. Following are some of the important tax amendments in this Budget –
Individual Tax Rates
The Finance Minister announced a cut in tax rate from 10% to 5% in the individual tax slab of Rs.2.5 lakh to Rs.5 lakhs. But the rebate under section 87A was reduced from Rs. 5,000 to Rs. 2,500 for the above income group. In spite of this, the individual who has a taxable income of up to Rs.3 lakhs does not have to pay any tax. The total tax savings for individuals between income Rs.3 lakhs to Rs.5 lakhs and between Rs.5 lakhs to Rs.50 lakhs is Rs. 7,700 and Rs. 12,900 respectively.
However, the large taxpayers have come under the ambit of bigger tax bracket owing to a surcharge of 10% to be levied if income if between Rs.50 to Rs.1 crore.
The other tax rates and surcharges, and 80C limit of Rs.1.5 lakhs will remain the same.
Lower Capital Gains Tax
The holding period for land, in order to be qualified as a long-term asset, has now reduced to 2 years from the earlier period of 3 years. This means that if the land is sold after two years, then it will be subjected to Long Term Capital Gains tax at the rate of 20%, instead of being taxed as short-term capital gains with a tax rate 30%
Also, the base year for calculating the indexed cost has changed from 1981 to 2001.
Simpler Tax Form
A simple one-page form will be introduced for the individuals whose taxable income excluding business income is less than Rs.5 lakhs.
Also, the individuals who are filing their tax returns for the first time will not be subjected to scrutiny unless it’s reasonably doubtful.
Corporate Taxes Slashed
The tax rate for MSME companies with income less than Rs.50 lakhs has been reduced from 30% to 25%.
The unlimited interest deduction under house property, given on rent has been limited to Rs.2 lakhs. This will reduce the demand for buying the second property.
Other Amendments: –
Penalty up to Rs. 20,000 will be imposed on the taxpayers who do not file their returns on time. The penalty shall not exceed Rs. 1,000 in case total income is less than Rs.5 lakhs
Reopening of tax cases up to 10 years if search operations reveal undisclosed income, over and above Rs.50 lakhs.
TDS of 5% to be deducted on rental payments above Rs. 50,000 per month, in order to bring higher rental income individuals under the tax bracket.
Emergency withdrawal up to 25% from National Pension Scheme (NPS) will not attract any tax.