April 21, 2017
It is that time of the year when many of you would be giving your investment declarations for the year to your employer.
April 21, 2017
It is that time of the year when many of you would be giving your investment declarations for the year to your employer.
Based on the investment declaration given by the employee in the beginning of the financial year, the employer deducts tax from the salary every month. So, before making the investment declaration it will be good to know the new tax rules applicable from the current financial year 2017-18.
- The tax rate for income slab of Rs 2.5 lakh – Rs 5 lakh has been reduced from 10 per cent to five per cent. This reduction in tax rate will result in a tax benefit of Rs 12,500 for taxpayers. If you add education cess (2 per cent), and higher and secondary education cess (1 per cent) to it, the tax saving will increase to Rs 12,875.
- The tax rebate enjoyed by the taxpayers under Section 87A has been reduced from Rs 5,000 to Rs 2,500. Earlier, it was available to those with a taxable income of Rs. 5 lakh, whereas now the limit has been reduced to Rs 3.5 lakh.
- In case of let out property, the set-off of 'loss from house property' from other income streams has been limited to Rs 2 lakh in a financial year. There was no cap on it earlier . So, if there was a loss from house property as the entire interest of home loan for a let out property was tax deductible, you could set off the entire loss against any other source of income hence reducing the tax burden substantially. But now, you can set off losses only up to Rs 2 lakh while can carry forward the loss for next eight years. But as in the initial years the interest cost is high, the tax savings will reduce substantially due to the Rs 2 lakh cap.
- In another move to encourage people to save more for their retirement, partial withdrawals from National Pension System (NPS) – up to 25 per cent of the contribution made by the employee – have been made tax-free. Moreover, self-employed individuals will now be eligible to claim deduction of up to 20 per cent of their gross total income, as against the existing 10 per cent, in respect of contribution made to NPS. This would be subject to the overall deduction limit of Rs 1.5 lakh.
- The tax break on Rajiv Gandhi Equity Savings Scheme available to first time equity investor will not be available from this year.
- Any taxpayer who is eligible to file tax return will face higher penalty in case he or she delays the filing of income tax return after the due date – July 31 of the assessment year is generally the last date. A tax penalty of Rs 5,000 will be levied if returns are filed after this date, and Rs 10,000, if filed after December 31 of the assessment year. However, for small taxpayers with income not exceeding Rs 5 lakh for a financial year, the penalty will be Rs 1,000 for delay in filing tax return. Earlier a taxpayer could file return till the end of the assessment year, and was penalised with a fine of Rs 5,000 at the discretion of the tax officer in case of delay.
- The time period for revising a tax return has been reduced to 12 months from completion of the financial year. The time frame for scrutiny assessments has been reduced from 21 months to 18 months for the next financial year, and is slated to be reduced further to 12 months from 2018-19.
- The holding period for computation of long term gains in case of property has been reduced to two years, from the existing period of three years.
- The base year for indexation has been shifted from 1-4-1981 to 1-4-2001. Indexation means adjusting the impact of inflation during the holding period of the capital asset so that it reflects the current market prices. The shift in base year will result in less tax liability for the buyer.
- It will be now be mandatory for those claiming a House Rent Allowance (HRA) of more than Rs 50,000 per month to deduct tax at source at the rate of 5 per cent. The TDS will have to be deducted on the last month of the year in which rent is paid or the last month of tenancy. In case the landlord (payee) does not have a Permanent Account Number (PAN), the tax deduction shall not exceed the amount of rent payable for the last month of the previous year, or the last month of the tenancy.
Courtesy: Business Today
