During the Union Budget 2017-18, Finance Minister Arun Jaitley had proposed several changes to personal income tax and also introduced some amendments in the Finance Bill. Last Wednesday, the Lok Sabha completed the budgetary exercise for the next financial year, and cleared the Finance Bill. Also, the amendments introduced in the Finance Bill was also passed by the Lok Sabha.
Beginning 1 April, 2017, here are the 10 important income-tax changes that tax payers need to take note of:
1) For employees in the yearly income group between Rs 2.5 and Rs 5 lakh, tax rate has been halved to 5 percent from the existing 10 percent, helping them save tax of up to Rs 12,500 a year, according to The Economic Times. A tax saving of Rs 14,806 a year, including surcharge and cess, will be available for income above Rs 1 crore a year. And for people whose taxable income is between Rs 5 lakh and Rs 50 lakh, tax savings amount to Rs 12,900.
3) A simple one page form will be introduced for filing tax returns to tax payers with income up to Rs 5 lakh and excluding any business income. The I-T department will not scrutinize those who are filing their tax returns for the first time in this category.
4) For investment under Rajiv Gandhi Equity Saving Scheme, no deduction will be available from the assessment year 2018-19, The previous UPA government had introduced this tax-saving scheme in the Union Budget for financial year 2012-13 with an aim to encourage first-time investors in the securities market.
5) Long-term holding period for an immovable property has been reduced to two years from three earlier. Hence, the new law coming in place will ensure that an immovable property held over for two years will be taxed at a reduced rate of 20 percent, with various exemptions eligible on reinvestment, the ET report said.
6) Tax exemption on reinvestment of capital gains in notified redeemable bonds will be available for individuals in addition to investment in NHAI and REC bonds.
7) For rental payments in excess of Rs 50,000 a month, individuals will have to deduct a five percent TDS (tax deducted at source). According to tax experts, this move will enable the government to bring people with large rental income into the tax net. This will come into effect from 1 June, 2017.
8) Delay in filing tax return for 2017-18 will attract penalty of Rs 5,000, if filed by 31 December, 2018, and the penalty will be higher if filed beyond this date. However, for small tax payers with income up to Rs five lakh, the penalty has been restricted to Rs 1,000.
9) The government has also made Aadhaar compulsory while applying for PAN and filing income tax returns from 1 July. In fact, the Centre in a bid to curb black money from the system has limited cash transactions at Rs two lakh against the originally proposed cap at Rs three lakh.
10) Individuals will not have to pay any tax in case of partial withdrawals from National Pension System (NPS). The proposed changes allows NPS subscribers to withdraw 25 percent of their contribution to the corpus for emergencies before retirement. Remember that withdrawal of 40 percent of the corpus is tax-free on retirement, the NDTV report says.
Apart from these changes to income tax rates, individuals will also have to brace for higher insurance for cars, motorcycles and health insurance from 1 April, as the regulator IRDAI has given its nod for insurers to revise commission of the agents. The change in premium after modification will be limited to +/- 5 per cent of the existing rates.
The increase will be in addition to the enhanced third party motor insurance rates, which too will come into effect from April.
With PTI inputs
Updated Date: Mar 27, 2017 13:31 PM