According to the statistics, out of 4.2 crore people working in the organised sector, only 1.74 crore individuals filed their tax returns last year. Mr. Arun Jaitley also said that of 3.7 crore individuals who filed tax returns, almost 99 lakh of them showed their income below exemption limit, 1.95 crore people were earning between Rs. 2.5 lakh to Rs. 5 lakh and only 24 lakh people showed their income above Rs. 10 lakh.
Here are the following changes with respect to Income tax for the year 2017-18.
1. The tax rate for income tax payers earning between Rs. 2.5 lakh – Rs. 5 lakh annually, has been reduced to 5% this year (2017-18) compared to the previous year (2016-17) which was 10%. For tax payers having a taxable income of Rs. 5 lakh or more, this particular change will give them a relief of Rs. 12,500.
2. If the earnings are between Rs. 5 lakh to Rs. 10 lakh annually, then there is no change in the tax slab and the normal rate of 20% tax on one’s earnings is applied and If one is earning more than Rs. 10 lakh annually, then like the previous year, tax rate of 30% on one’s income is applied
3. Sec 87A provides for a rebate of an amount equal to Rs. 5000/- for all the tax payers, however, from this year it has been reduced to Rs. 2500 and is available only for those tax payers whose annual income does not exceed Rs. 3.5 Lakh.
4. In order to make up for Rs. 15,000 crore loss due to reduced cut in personal income tax rate, there is a surcharge of 10% for those people whose annual income is between Rs.50 lakh to Rs.1 crore over and above the tax rate of 30%. An additional surcharge of 15% is applicable on those people earning more than Rs. 1 crore.
5. There is a simple one page form for filing tax returns for individuals having taxable income up to Rs. 5 lakh other than the business income. Moreover, there will be no scrutiny on those people who file their tax returns for the first time unless there is some specific information available with the Income Tax Department.
6. Tax payers, who would not file their returns on time, shall be penalized with an amount of Rs. 10,000 from the Assessment Year 2018-19. The fee will be Rs. 5000 if the returns are filed within the month of December of the Assessment Year. However, if the total income is less than Rs. 5 lakh then the penalised amount will be up to Rs. 1000.
7. For small and medium sized companies also, tax rate have been cut to 25% compared to 30% earlier. According to the finance minister this tax rate cut will benefit approximately 90% of the companies in the country.
8. There are positive measures taken for properties as well. The term long term gain in terms of holding the property is reduced to 2 years compared to 3 years. Currently, if the property is sold within 3 years of buying then the profit from that transaction will be considered as a short term gain and is taxed according to the slab rate.
9. Addressing the deviation of interest deduction for properties to be specified as self-occupied or let out (rented) ones, it is proposed to restrict set off of loss from house property in the current year of up to Rs. 2 lakh. The balance loss would be carried forward for set off against house property for 8 assessment years.
10. The budget has made a provision that if the rent of a property is Rs. 50,000 or more per month then 5% TDS (Tax Deducted at Source) will be charged. This move will reduce the speculative activity of wealthy people as properties were the only sources of tax savings and now these deductions will no longer be available.
11. Time limit for scrutiny of the cases has been reduced to 18 months for Assessment Year 2018-2019 and to 12 months for Assessment Year 2019-2020.
12. Partial withdrawals from NPS (National Pension Scheme) will not be taxable. According to the changes in the budget, an NPS subscriber can withdraw 25% of the amount of corpus contributed to the scheme. On retirement, 40% of the withdrawal of the corpus is already tax-free.
These are the few changes which are now applicable from April 2017. The budget has provided relief to those tax payers who are from the middle class section and has surely increased the sources of tax collection and also promote cashless economy.