Changes in Income Tax Rules to Be Effected from FY 2017-18

GURGAON, India - April 4, 2017 - PRLog -- Union Budget has brought many changes in the Indian income tax rules which will be applicable from the current financial year. Changes in the tax rate imposed on income tax slabs are the significant ones' worth special mention. The other important change that worth mention is a restriction on cash transaction which is going to affect almost all economic class of the society. The cash transaction limit has been set to INR 2 lakhs in order to curb the black money accumulation.

The important facts to know about the changes announced in the budget:

• For the income tax slab of INR 2,50,000-5,00,000, the tax rate has been decreased to 5% from 10%. However, the rebate mentioned under Section 87A has been also reduced from INR 5,000 to INR 2,500. Added to that, no rebate will be applicable for individuals earning above INR 3.5 lakhs.

• For individuals with income between INR 50 lakhs to 1 Cr will have to pay a surcharge of 10%. However, the surcharge rate will remain same for the individuals earning above INR 1 Cr as earlier.

• Deductions for investing into Rajiv Gandhi Equity Saving Scheme will be no more allowed from the financial year 2017-18.

• A simpler 1-page income tax return form has been introduced for the individual earning up to INR 5 lakhs a year. This form is available online through government tax e-filing website.

• No scrutiny will be done for the first-time taxpayers with an income below INR 5 Lakhs unless IT department receives any information regarding suspicious high-value transaction.

• The penalty for not filing income tax return has been tightened for this current financial year. Non-filing of income tax return will attract a penalty up to INR 10,000. However, the amount will not exceed INR 1,000 for the taxpayers below the income level of INR 5 lakhs a year.

The fees will be charged as mentioned below for late filing:

1st August/1st September – 31st December: INR 5,000

1st January - 31st March: INR 10,000

• From 1st April 2017, Income Tax officials will have the power to reopen any cases up to 10 years old if any strings of undisclosed earnings/assets over INR 50 lakhs found in the search operations. They will be able to scrutinise account books of such taxpayers for the past 10 years.

• The set-off margin for loss on house property against other income head has been restricted to INR 2 lakhs per year. If losses were not set-off for any year, then that can be carry forwarded to set-off against "income from house property" head for next 8 assessment year.

• For a let-out property, a deduction up to INR 2 lakhs can be claimed against home loan interest. This threshold of up to 2 lakhs is applicable after adjusting the rental income. Loss above this limit is mandatory to carry forwarded to the upcoming assessment years.

• The holding period for a property to qualify as a long-term capital gain has been decreased to 2 years from the current limit of 3 years. So, if any property is sold within 2 years from purchasing then it will be treated as short-term capital gain and will be taxed as per the income slab rate applicable to the taxpayer.

• From 1st June 2017, taxpayers are required to deduct TDS at a rate of 5% for rental payments over INR 50,000 per month.

• Taxpayers not covered under the "Presumptive Taxation Scheme" and earn above INR 1,20,000 or have a turnover above INR 10 lakhs, have to maintain account books on a mandatory basis. The limit for individuals will be INR 1.5 lakhs and for HUFs, it will be INR 25 lakhs.

• Taxpayers covered under "Presumptive Taxation Scheme" are not liable for audits if they earn below INR 2 Cr. For professionals, the limit is set to INR 50 lakhs and for businesses/LLPs, the limit for the same is set to 1 Cr.

• All dividends will be taxable at a rate of 10% except the cases of domestic companies, institutions registered under Section 10(23) and trust registered under section 12A.

• Taxpayers will not require paying taxes for partial withdrawal from National Pension Scheme (NPS) if they withdraw 25% of the contribution before retirement due to any emergency.

• From 1st July 2017, taxpayers are required to produce Aadhaar details on a mandatory basis for filing income tax return.

These rules are going to change the picture of income tax filing trend in India for sure in the upcoming year. These changes have been introduced to increase the number of tax filers, especially the lower tax slab group who ignore tax filing due to complex IT rules.


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