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Personal Tax Impact – Indian Budget 2017-2018

budget 2017-18

Budget 2017 was unique in the sense that it changed two things

  • the age-old tradition of being presented on the last day of February, this year it was done on 1st of Feb and
  • for the first time in independent India, the Railway Budget was combined with the general Budget.

Key Personal Taxation Change

1. Tax Slab changes The rate of income tax is proposed to be reduced to 5% (from 10%) for income between INR 2.5 to INR 5 lakhs. This is likely to bring tax saving of at least INR 12,875 for all taxpayers with an income exceeding INR 5 lakhs. Other tax slab and rates remain unchanged.

TOTAL Income Proposed Tax (AY 2018-19) Existing tax AY 2017-18)
upto Rs 2.5 lakhs Nil Nil
Rs 2.5 – 5 lakhs 5% 10%
Rs 5 – 10 Lakh 20% 20%
above Rs 10 lakh 30% 30%

2. Surcharge A surcharge of 10% on tax payable is proposed for individuals having an income of INR 50 lakhs to INR 1 crore.

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Also read – Read other important Budget announcements – Key details / Summary

3. Tax rebate The rebate for the low income earners (under section 87A) is proposed to be reduced to INR 2,500 from the present limit of INR 5,000 and will be available only in case of income up to INR 3.5 lakhs (earlier, INR 5 lakhs). This is to avoid double exemption.

4. Long-term capital asset The holding period in respect of immovable properties to qualify as long-term capital asset has been proposed to be reduced to 24 months from 36 months. The base year for computation of capital gains for old capital assets acquired before 1 April, 1981 has been proposed to move to 1 April, 2001. Now the cost of acquisition of assets acquired before 1 April, 2001 shall be allowed to be taken at fair market value as of 1 April, 2001. 

5. Exemption on withdrawal from National Pension Scheme (NPS) In case of partial withdrawal from the NPS, it has been proposed to exempt withdrawal up to 25% of the contribution made by the individual. 

6. Deduction for NPS contribution It is proposed to increase the deduction up to 20% of the gross total income (earlier 10%) for a non-employee contributing to NPS. This has been proposed to bring parity in the deduction available to employees (10% of employer and 10% of employee contribution) shall be subject to the overall ceiling limits.

Also read – Read other important Budget announcements – Key details / Summary

7. Tax on certain long-term equity share or units Equity shares in a company or a unit of an equity-oriented fund acquired on or after 1 October, 2004, on which STT has not been paid on purchase, is proposed to be taxed as long-term capital gains. Presently, the capital gains arising on transfer of above assets is exempt from tax, if the sale transaction suffers STT.

8. Restriction of set off of loss from house property Under the existing provisions, loss from house property is allowed to be set off against any other income (without any limit). It is now proposed to limit such set off to INR 200,000. Any unabsorbed loss from house property can be carried forward to set off against income from house property up to eight years. 

9. Withdrawal of deduction for investment in RGESS equity savings scheme To promote investment in RGESS equity savings schemes, deduction for such investment was introduced in Finance Act, 2012, to the extent up to 50% of the amount invested or INR 25,000 whichever is lower, subject to prescribed conditions. It is proposed to withdraw this deduction with the sunset clause i.e., investments made until 31 March, 2017, will be eligible for the deduction for next two years i.e., till 31 March, 2019, subject to fulfilment of conditions. 

10. Restriction on cash donations The maximum limit of cash donations deductible under section 80G has been proposed to be reduced to INR 2,000 from INR 10,000.

Also read – Read other important Budget announcements – Key details / Summary

11. Exemption from capital gains taxation on reinvestment in specified bonds Section 54 EC allows for an exemption from long-term capital gains in respect of investments made in certain specified bonds i.e., NHAI or RECL. It is now proposed to extend the exemption in respect of investments to be made in certain other bonds to be notified by the central government.

12. Withholding on rent It is proposed that individuals paying rent of INR 50,000 or more for a month/ part of the month during the previous year should withhold income tax at the rate of 5% in the last month of the previous year or last month of tenancy.

13. Filing of return A simplified tax return form (one page) is proposed to be introduced for individuals having taxable income (other than business income) up to INR 5 lakhs.

14. Presumptive Taxation –  

  • Under scheme for presumptive taxation for professionals with receipt upto Rs 50 lakh p.a. advance tax can be paid in one instalment instead of four.
  • Threshold limit for audit of business entities who opt for presumptive income scheme increased from Rs 1 crore to Rs 2 crore.
  • Similarly, the threshold for maintenance of books for individuals and HUF increased from turnover of 10 lakhs to 25 lakh or income from 1.2 lakh to 2.5 lakh.
  • Under scheme of presumptive income for small and medium tax payers whose turnover is upto 2 crores, the present, 8% of their turnover which is counted as presumptive income is reduced to 6% in respect of turnover which is by non-cash means

Also read – Read other important Budget announcements – Key details / Summary

15. Time period for revising a tax return is being reduced to 12 months from completion of financial year, at par with the time period for filing of return. Also the time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and thereafter

16.No transaction above Rs 3 lakh would be permitted in cash subject to certain exceptions

Also read – Read other important Budget announcements – Key details / Summary

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