The Union Budget 2017-18 encompassed a few changes to the Taxation in India. The Government introduced a few regulations, lowered interest rates on savings schemes, relaxed tax slabs, and brought penalties on filing income tax late. Let us have a look at each of these changes in detail:
New Tax Rules Applicable from April 1, 2017
1. Income Tax (IT) Slab Changed: The Central Government reduced the tax rate by 50% to the previous 10% charged to employees in the income group of Rs. 2.5 lakh to Rs. 5 lakh, to now 5% only. This move is intended to help people save tax by at least Rs. 12,500 per annum.
2. Penalty for Late IT Return Filing: A penalty of Rs. 5,000 will come to affect those who file IT return late for FY 2017-18. This penalty amount is applicable until filing an IT return by December 31, 2018, after which a higher penalty will be charged if the same process is delayed further.
One can use tools like an income tax refund calculator to understand the returns available. For small taxpayers in the income group of up to Rs. 5 lakh, the penalty fee is limited to Rs. 1,000/.
3. Reduction in LTCG: The long-term holding period on immovable property that attracted a fee of 20% per cent, was for three years earlier, but is now reduced to just two years.
4. Base Year Lowered for Indexation in Capital Gains: The government has changed the base year of indexation of cost from April 1, 1981, to April 2001. Those looking to cash in from long-term capital gains tax may not find this option much more beneficial from now onward.
5. Rewards on Redeemable Bonds: There are exemptions on taxes on investment in REC, NHAI bonds and for those who reinvest capital gains in stated redeemable bonds.
6. Premium on Insurance Increases: Higher insurance premiums will apply on that related to health, motorcycles, and cars as agreed by IRDA. The third-party motor insurances rates have also increased. However, no changes are done to the tax refund loans or the EMI system.
7. Aadhar Mandatory for PAN Card: Now Aadhar card is necessary when a person applied for PAN Card or files for income tax returns dated from July 1. Also, cash transactions have been limited to Rs. 2 lakh from the earlier proposed restriction of Rs. 3 lakh.
8. Simpler ITR Form: One page ‘Sahaj’ form is now the norm to file tax returns for taxpayers up to the income group of Rs. 50 lakh, but business income is non-applicable under this condition. Those who are filing returns on taxes for the first time in this section will not be scrutinized by the I-T department.
9. Penalty on Withdrawal after a Limit: If a minimum balance (as per rules of the bank) is not maintained in the savings account every month, then the person has to pay an asked service charges plus service tax. As per SBI rules, the minimum bank balance to retain is Rs. 5,000 and failing to do so will incur Rs. 100 plus service tax as a penalty. If the balance is below 75% of the amount needed, then a lesser penalty will be levied, and henceforth.
10. No Tax on Partial Withdrawal on NPS: There will be no tax to pay on partial withdrawal funds from National Pension System (NPS). So, one can withdraw 25% of the amount before their retirement, in case of emergencies. 40% of the corpus at retirement is also tax-free on withdrawal.
11. No Deduction Benefit on RGESS Scheme: No deduction will be available on investment pertaining to Rajiv Gandhi Equity Saving Scheme, which was earlier offering a 50% deduction on the investment amount from the taxable income for that particular year under 80CCG.
12. TDS on Rental Payment: Now 5% tax deducted at source (TDS) will apply for rental payments of more than Rs. 50,000. This will go in effect from June 1, 2017.
The above-mentioned changes in the tax regime may bring certain repercussions and benefits for Indians. To understand the taxation system of the country in detail, visit the website loanbaba.com, which is also an online platform where one gets a loan in a jiffy without having to visit banks or NBFCs personally.
Just compare top banks for loans in India and use the interest rate calculator among other free financial tools on this website to manage your finances and taxes effectively.