Changes in Income Tax law from 1st April 2017: The Financial Bill 2017 (commonly known as Budget) has been passed by the Lok Sabha with some amendments. This bill deals with government finances along with tax provisions. Here are 21 changes that would be effective from the next financial year (FY 2017-18) which starts on 1st April, 2017.
Key Changes in Income Tax Law w.e.f. 1st April, 2017:
- Basic Tax Exemption limit is Rs. 2,50,000/- (same as earlier) After that, up to 5 Lakh, Tax rate is reduced from 10% to 5%.
- Tax rebate under section 87A is reduced to Rs.2,500/- from Rs. 5,000/- per year for taxpayers with income up to Rs. 3,50,000/- (earlier Rs. 5,00,000/-). HUF or NRIs are not eligible for this rebate. Due to this change Senior citizens with income between Rs 3.5 lakhs to 4 lakhs would pay more tax in FY 2017-18 as compared to FY 2016-17.
- Limit for payment of expenses by cash (Both capital and revenue expenditure) reduced from Rs. 20,000/- to Rs. 10,000/- per day in aggregate per person.
- No Person shall receive an amount of two lakh rupees or more by cash (Sec 269ST).
- For below Rs. 2 crores turnover cases & For Non cash sales (through Digital, Online, Cheque, Bank etc.) : Net Profit will be taken as 6% of Turnover/ Gross Receipts. It is 8% For Cash Sales.
- Surcharge at the rate of 10% of tax levied on rich taxpayers with income between Rs. 50 Lakh and Rs. 1 Crore. The rate for surcharge for the super-rich, with income above Rs.1 Crore will remain 15%.
- Starting 1st June, 2017, Individuals or HUFs (not subject to Tax Audit requirement) will be required to deduct a 5% Tax Deducted at Source (TDS) for rental payments above Rs. 50,000/- per month.
- To qualify as long-term capital gains, the holding period will be reduced to two years from three years in respect of Land and Building.
- For calculation of indexation in case of Long Term capital gains for all assets, the base year has been changed from 1st April, 1981 to 1st April, 2001. This would in most cases be beneficial for tax payers.
- Corporate tax rate for the account year 2017-18 for companies with annual turnover up to Rs. 50 crores (in account year 2015-16) is reduced to 25%. No change in firm tax rate of 30%.
- Any donation above Rs 2,000 in cash would not be eligible for tax exemption u/s 80G. Donations have to be digital or by cheque to qualify for tax breaks.Shares of unquoted shares to be taxed at (deemed) fair value.
- Tax exemption will be available on reinvestment of capital gains in notified redeemable bonds (In addition to investment in NHAI and REC bonds).
- Deduction for first time investors in listed equity shares or listed units of equity oriented funds under the Rajiv Gandhi Equity Savings Scheme under section 80CCG of Income Tax Act, 1961 is withdrawn from F.Y. 2017-18. If an individual has already claimed deduction under this scheme before 1st April, 2017, They shall be allowed to avail a deduction for the next two years.
- No tax is applicable for partial withdrawals from National Pension System. NPS subscribers will be able to withdraw 25% of their contribution to the corpus for emergencies before retirement. Withdrawal of 40% of the corpus is tax free before retirement.
- In absence of PAN of the buyer of specified goods, the rate of TCS will be twice of the extent rate or 5%, whichever is higher.
- From Financial Year 2017-18, if Return is not filed within due date, late fee of Rs. 5,000/- for delay up to 31st December, and Rs. 10,000/- thereafter. Such fee will be restricted to Rs. 1,000/- for small taxpayers with income up to Rs. 5 lakh.
- A simple one page tax return form is to be introduced for Individual with taxable income up to Rs. 5 lakh (excluding Business Income). Those filing returns for the first time in this category will generally not be subject to scrutiny.
- Time period for revision of tax return cut to one year (from 2 years) from the end of relevant financial year or before completion of assessment, whichever is earlier.
- Where Section 12AA registered trusts modify their object clause, they need to apply within 30 Days to CIT for approval.
- Aadhaar number will be a must while applying for a PAN Card as well as for filing income tax returns. Earlier it was optional to disclose Aadhaar number. Generally the last date of filing IT return is 31st July. Therefore, it is advisable for taxpayer to get their Aadhaar number at the earliest.
- Income tax officials will be able to reopen tax cases as old 10 years, if search operational reveal undisclosed income & assets of over Rs. 50 lakhs.
Knowing about these changes in Income Tax laws for the new Financial Year 2017-18 will help you plan your taxes better!