Union Budget 2017: What Arun Jaitley not said

Fee on the Late filing of Return:

To achieve the objective of making India a tax-compliant society, Budget 2017 seeks to impose the fee on the delayed filing of returns to be applicable from AY 2018-19.

• 5,000: If the return is filed after the due date but before 31st Dec of the relevant AY.
• 10,000: Return filed after 31st Dec of relevant AY.
• However, the amount of penalty will not exceed Rs. 1000 where total income does not exceed Rs. 5 lakh.

Change in Tax Slab Rate

Reduction in tax rates is a long pending demand and focus also needs to be on reducing the complexity of direct tax laws. The Union Budget has well addressed this issue and rationalization of tax rates has been made to incentivize the tax payer for widening the tax base of the country.

The Income Tax Slab Rate Post Budget 2017:

Surcharge of 10% on Affluent:

In order to fill the gap of revenue loss due to the reduction in tax rates, an additional burden of the surcharge of 10% on individuals having taxable income from Rs.50lakhs to Rs.1crore is imposed. At a post-Budget Interaction with the Industry chambers, FM justified the levy of the additional surcharge, saying that In a largely non-tax compliant society, the state needs resources and the resources will have to come from the more affluent as far as the tax structure is concerned. The 15% surcharge on individual taxpayers with taxable income exceeding Rs.1crore remains in force.

New ITR Form

To ensure tax compliance in India and for easing the process of filling income tax return, a simple one-page ITR form is to be introduced by the Government for individuals with taxable income (excluding business income)up to Rs.5 Lakhs.

Rebate u/s 87A:

The existing limit of rebate u/s 87A of Rs.5,000 from the income tax payable has been slashed down to Rs.2,500. Earlier the rebate was available to small tax payer with the total income of up to Rs.5,00,000, now reduced to Rs.3,50,000 from AY 2018-19(FY 2017-18) onwards.

The Union Budget 2017 Impact on Individual taxpayers is demonstrated below:

You can assess the impact of Budget announcements on your Income with our Budget Impact Calculator.

House Property:

The current provision allows a tax payer to take the benefit of claiming entire interest paid on home loans for property other than self-occupied as the deduction in the same year to the extent of income available under all the heads of Income and the remaining loss if any, was allowed to be carried forward for 8 AY.

There was no upper limit on setting off of losses in an AY, thereby saving money on taxes.

However, the scenario has been changed with the advent of Budget 2017-18. Now the losses under House Property can be set off against other heads of Income only to the extent of Rs.2Lakh in a year. The balance loss shall be carried forward for 8 AY. This may increase your outgo on taxes.

TDS:

On Commission: Budget 2017-18 seeks to reduce compliance burden in the case of Individual insurance agents with nil tax liability. The Budget seeks to exempt TDS of 5% being charged on commission paid to individual insurance agents; on his furnishing of a self-declaration in Form 15G/15H declaring that the tax on his estimated total income for the year shall be Nil to the deductor.

• On Rent: To widen the scope of tax deduction at source, Individuals and HUF not covered under provisions of tax audit are also required to deduct tax at source at the rate of 5% on rent paid to a resident exceeding Rs.50,000 for a month.For reducing the compliance requirement, the deductor is not required to obtain TAN and would be required to deduct tax only once on the entire amount paid either at the end of the year or at the end of the tenancy period (if the property is vacated during the year), whichever is earlier.

Promoting Digitalization:

• To demotivate cash transactions in the economy, the govt. seeks to disallow any cash payments made exceeding Rs.10,000 (previously Rs.20,000) to a person in a single day, while computing profits from the business of the taxpayer.
• Presently, the rate of deemed profits for businesses availing the benefit of Sec 44AD (presumptive income section) is 8% of total turnover, irrespective of whether received through cash or non-cash medium. With the aim of promoting digital transactions and encouraging acceptance of digital payments, govt seeks to incentivize these small businesses availing the benefit of presumptive taxation.
  • The Union Budget 2017-18 has reduced the rate of deemed profits to 6% only for such turnover received through non-cash medium and for turnover received through cash, the existing rate of 8% will continue to apply.
    NOTE: Businesses having turnover up to Rs.2crore is covered under Sec 44AD (presumptive income section) of the Act.
  • A new section 269ST is introduced in the Act to help achieve the objective of curbing generation of black money and making India a clean economy. No person can receive cash in excess of Rs.3lakh on a single day from a person or in respect of a single transaction. In the case of non-compliance with the section, a penalty of the amount equal to receipt will be imposed u/s 271DA.

Maintenance of Books of Accounts:

Earlier sec 44AA of the Act provided for maintenance of books of accounts and documents only by those persons who are carrying on business and profession (other than the specified profession of medical, legal, etc.) and whose income exceeds Rs.1,20,000 or whose turnover exceeds Rs.10,00,000 in the previous year.

With the motive of encouraging businesses and providing them with ease of doing business, the limits have been revised in the Budget 2017-18 from Rs.1,20,000 to Rs.2,50,000 and Rs.10,00,000 to Rs. 25,00,000, thereby reducing the compliance requirement.

Tax Audit turnover limits:

Since, the threshold limit for applicability of presumptive taxation u/s 44AD was increased to two crores rupees by Finance Act 2016 a similar amendment is required in sec 44AB of the Act. In simple words, the threshold limit for the tax audit under Section 44AB was not increased to Rs. 2Crores for the taxpayers opting for the presumptive scheme u/s 44AD.

Therefore, the person declaring profits for the year under presumptive taxation scheme u/s 44AD is not required to get his books of accounts audited.

Donations to Charitable Trust:

The limit of cash donations to charitable institutions under Section 80G is now restricted to Rs.2,000 from the earlier available Rs.10,000.

National Pension System:

Currently, an individual either an employee or a self-employed can contribute and claim benefits under the Act.

In the case of an employee, contribution up to 20% (10% employee contribution and 10% employer contribution) of salary is allowed as the deduction, whereas in the case of self-employed only 10% of gross total income, being his own contribution to the fund is allowed as deduction. Also, 40% of total amount payable by an NPS trust to an employee at the time of closure of scheme is exempted from tax.

Budget 2017-18 seeks to rationalize the existing provisions of the scheme by introducing two major amendments.

Firstly, in order to bring parity between an employee and a self-employed, the contribution up to 20% of gross total income will be allowed as the deduction to the self-employed individual as well.

Secondly, relief is further granted to employee subscribers of NPS by exempting partial withdrawal up to 25% of his own contribution to the fund (not employer's contribution) from tax.

The above amendments will apply from AY 2018-19 (FY 2017-18) onwards.

Professionals allowed to pay advance tax in single installment:

Professionals with receipts up to Rs.50Lakhs p.a. eligible for the presumptive taxation scheme can pay advance tax in one installment instead of four on or before the 15th March of the F.Y.

Revised Return:

The time period for revising a return filed within the prescribed time is being reduced to 12 months from completion of respective FY as against the time period of 24 months provided earlier.

For ex:
Income tax Return for FY 2017-18(AY 2018-19) could have been revised until March 31, 2020.
However, this period of revision has been reduced and now can be revised by March 31, 2019, only.
The amendment will be applicable from AY 2018-19.

Capital Gain Reforms:

• On transfer of long-term capital asset, the benefit of concessional rate of tax and also indexation benefit is provided by the Act. At present, for an immovable property to qualify as the long-term asset, the period of holding is 36 months. The same is revised to 24 months in the Budget 2017-18 to promote investments in the real-estate sector and give a boost to the sector hit by the demonetisation move.
• As per existing provision, for computing capital gains in respect of an asset acquired before 01.04.1981, the assessee is allowed to take either the fair-market value of the asset as on 01.04.1981 or the actual cost of the asset as the cost of acquisition. Since the base year for computing, the indexed cost of acquisition or cost of improvement has become more than three decades old, assessees are facing genuine difficulties due to non-availability of relevant information for computation of fair market value (FMV) of such asset as on 01.04.1981.

To remove this difficulty, now base year shall be 2001. In other words, the cost of acquisition of an asset acquired before 01.04.2001 shall be allowed to be taken as FMV as on 1st April, 2001.