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Relevant for individual tax payers

Tax Rates

  • Tax rate for individual assessee, having income between Rs.2.5 lakhs to Rs.5 Lakhs, is reduced to 5% from existing rate of 10%.
  • Surcharge @10% of tax payable on categories of individuals whose annual taxable income is between Rs.50 lakhs and Rs.1 crore is proposed.
  • Surcharge @15% for taxable income above Rs.1 crore will remain the same

Rebate under S.87A

  • Amount of tax rebate is reduced to Rs.2500 from Rs.5000 for individual assessee whose taxable income is up to Rs.3.5 Lakhs. (Limit of Income for purpose of this section reduced from Rs.5 Lakhs to Rs.3.5 Lakhs).

Restriction on set-off of loss from House Property (S.71)        

  • Loss from House property due to interest on housing loan shall be restricted to set off up to Rs.2 lakh against any other income in any assessment year. Unabsorbed loss shall be allowed to carry forward in 8 subsequent years.

Deductions

  • Additional deduction of Rs.50000 for interest paid shall be allowed for first time buyers if conditions are fulfilled. S.(80EE)
  • Allowable deduction u/s 80G for donation made in cash is reduced to Rs.2000 from Rs.10000.
  • Deduction for investment in RGESS u/s 80CCG is withdrawn from 2017-18. Those who have already invested before 01/04/2017 shall be allowed to claim deduction for next two years.

Capital Gains:

  • Investment in any bond (other than REC and NHAI) redeemable after 3 years (as notified by CG) shall also be eligible for exemption u/s 54EC.
  • Holding Period for immovable property to be qualified as long term is reduced from 3 years to 2 years and shall continue to be taxed @20%.
  • 55 is proposed to be amended so as to provide that Cost of acquisition (CoA) of asset acquired before 01/04/1981 shall be allowed to take as FMV as on 01/04/2001.
  • Base year for indexation is also proposed to be shifted from 01.4.81 to 01.04.2001.
  • Exemption from capital gains u/s 10(38) for income arising on transfer of equity shares acquired on or after 01/10/2004 shall be available only if STT was also paid at time of acquisition of shares.

NPS

  • 10 shall be amended to provide exemption to partial withdrawal not exceeding 25% of the contributions made by employee as per conditions by PFRDA, 2013.
  • An employee gets deduction @10% for contribution by employer and 10% for own contribution under existing provisions. Deduction for NPS contribution u/s 80CCD shall be increased to 20% from 10% for individuals who are self- employed to bring in parity with individuals who are employed.

Others

  • Simple one page ITR Form to be filed as Income Tax return for the category of individuals having taxable income up to Rs.5 lakhs excluding business income.
  • Time period for revising income tax return is being reduced to 12 months from completion of financial year.
  • Time for completion of scrutiny assessments is also being compressed from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for assessment year 2019-20 and thereafter.
  • 194IB shall be inserted to provide that Individual/HUF responsible for paying to a resident income by way of rent exceeding Rs.50000 for a month/or part of a month shall deduct TDS @5% from such payment. Deductor shall be liable to deduct tax only once in a previous year.
  • Withholding of Refund during assessment proceedings: S.241A shall be inserted to provide that for the returns furnished for Assessment Year commencing on or after 01/04/2017, where refund becomes due to assessee u/s 143(1) and Assessing officer is of the opinion grant of refund may adversely affect the recovery of revenue, he may, with prior approval of CIT, withhold the refund up to the date on which assessment is made.

Limitations on Cash Transactions               

  • Threshold limit of cash payment to a person is proposed to be reduced from Rs.20000 to Rs.10000 under S.40A(3). As per existing provisions payment for any expenditure made in cash to a person in a day exceeding Rs.20000 is not allowed as deduction.
  • 269ST shall be inserted to provide that no person shall receive CASH amount of Rs.3 Lakhs or more:

–  in aggregate from a person in a day

–  in respect of single transaction or

– in respect of transactions relating to one event from a person (Exception: Govt., Banking Company, Post Office)

Penalties

  • 234F: Fee for default in furnishing return of income.

If any person fails to file return of income within time prescribed in S.139(1), he shall be liable to pay fee* of :

  • 5000, if return is furnished on or before 31st December of Assessment Year.
  • 10000 in any other case.

* If total income of person does not exceed Rs.5 Lakhs, fee payable shall not exceed Rs.1000.

  • New S.271DA shall be inserted to provide for the contravention of S.269ST. The penalty is proposed to be a sum equal to the amount of such cash receipt.

Disclaimer: Budget 2017 proposals presented by Finance Minister before the Parliament are summarized above. The proposals are subject to amendments as the Finance Bill is yet to be passed by the Parliament. This document is not an offer, invitation or solicitation of any kind and is meant for use of clients and Company/firm’s personnel only. DKM accepts no responsibility for any loss caused by person relying on it.

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