Income Tax Changes You Should Be Aware Of

 The Union Budget for 2017 was announced by our Finance Minister, Arun Jaitley, on the 1^st of February, 2017. But, did the budget meet the expectations of the ‘aam aadmi’?

Although the new budget is quite people-centric and lays a lot of emphasis on empowering the youth of the country, not everyone was satisfied with Arun Jaitley’s fourth budget. For instance, Lola Maan, a senior executive at a private firm, said, “There is nothing exceptional in this year’s budget for the salaried folks falling in the Rs. 5 lakhs and above bracket.”

Additional Reading: Union Budget 2017: What You Need To Know

Anyway, let’s discuss the budget’s hits and misses later. For now, here’s what you, as an individual taxpayer, should know about the 2017 Budget:

• The tax rate has been decreased from 10% to 5% for incomes between Rs. 2,50,000 and Rs. 5,00,000. Wondering what’s in it for you? With this rate decrease, you can now save up to Rs. 12,500 per year. And if your income is above Rs. 1 crore, you can save up to Rs. 14,806 yearly (after including surcharge and cess).

Additional Reading: Income Tax Slabs For FY 2017-18

• For taxpayers with an income of up to Rs. 3,50,000, the tax rebate is now Rs. 2,500 per year. Earlier, it was Rs. 5,000. This is good news for everyone with a taxable income of Rs. 3,50,000 since the total tax payable will reduce from Rs. 5,150 to Rs. 2,575 from this year onwards.

• If your taxable income is between Rs. 50 lakhs and Rs. 1 crore, the new budget has introduced a surcharge of 10% on your Income Tax. There has been no change to the 15% surcharge levied on those earning more than Rs. 1 crore.
• The Budget 2017 has curbed tax benefits for Home Loan borrowers with regards to let-out property or those ‘deemed let-out’. Previously there was no limit on the amount that could be set off as ‘loss from property’ against the salary. Budget 2017 caps this limit to Rs. 2 lakhs and it can be carried forward for eight assessment years. This limit is the same as deduction on Home Loan interest repayment allowed for self-occupied properties.Previously, a person could claim tax sops on the entire interest amount paid on Home Loan, municipal tax and 30 percent of rental income for a let-out property. In most cases, these deductions would result in zero rental income, which could be set off as ‘loss from house property’ against the salary.

• Now, you don’t have to wait for three years to reap long-term gains on immovable property. The holding period for gains to be classified as long-term has been reduced to two years. This move not only reduce the tax burden on those of you looking to sell your property in two years, but it also intends to promote investments made in the real-estate sector.

Additional Reading: How To Calculate Capital Gains And Save Tax

• Also, the new budget has changed the base year for indexation of cost of immovable assets to 2001 from 1981. This will help improve the acquisition cost of such immovable assets, while reducing their total capital gains. In short, the profits on sale of immovable assets will be lower than before.

• Starting 1 June, 2017, individuals will be required to deduct a 5 per cent TDS (Tax Deducted at Source) for rental payments above Rs. 50,000 per month. This has been done to get the recipients of a fat rental income come under the radar.

• Earlier, there weren’t many options to invest your capital gains and seek tax exemption. But the new budget has brought about new options to help you save on capital gains tax. In addition to earlier options, which included investment in NHAI and REC bonds, you can now reinvest your capital gains in notified redeemable bonds.

• Who says that our government doesn’t care about us? If your net taxable income falls within Rs.5,00,000, our government will be introducing a one-page tax return form to ease the filing process for you. And here’s the icing on the cake. Those who are filing their taxes for the first time will not be subject to scrutiny.

• However, if you fail to file your tax returns or file them after the deadline, you will be charged a penalty from this year onwards. Although those with income less than Rs. 5,00,000 will be charged a meagre Rs. 1,000, taxpayers from higher income brackets will attract a penalty of Rs. 5,000 (if filed by 31^st December 2018) or Rs. 10,000 (if filed after 31^st December 2018).

• Income tax officials will be able to reopen tax cases as old as 10 years, if search operations reveal undisclosed income & assets of over Rs. 50 lakh. Presently, tax officials can go as far back as six years.

Bonus Read: How To File Tax Returns Online!

• Have you invested under the Rajiv Gandhi Equity Savings Scheme? We’re extremely sorry but this has been scrapped by our dearest Finance Minister. First-time retail investors in this scheme will no longer be able to benefit from tax deductions on their investments. However, if you have already claimed deductions under this scheme before 1^st April 2017, then you will be allowed to claim deductions for another two years.

• The time period to revise your tax return has been reduced from 24 months to 12 months. These 12 months will be calculated either from the completion of the assessment year or the financial year, whichever is earlier.

• Finance Minister Arun Jaitley, in the Finance Bill, has made Aadhaar mandatory for filing tax returns and PAN applications.

There were a lot of expectations from Budget 2017. But, the budget didn’t quite meet them all. It could be because most of the measures announced were directed towards our economy as a whole and towards expanding tax compliance across the country.

And, as far as hurting individual sentiments is concerned, one can’t always expect to get everything they want, right?