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2017

Important Changes in the Income Tax Laws effective from A.Y. 2018-19

Important amendments in Income Tax Act which have become effective from the new F.Y. 2017-18 are as under.
  • Reduced Tax Rate : The new Finance Bill has brought much relief to the middle class by effectively reducing taxability of salaried individuals in the income bracket Rs. 2.5 lakh to Rs. 5 lakh. In the F.Y. 2015-16, the tax rate for this income group was 10%. This will get reduced to 5% in the upcoming F.Y. All other income groups will also receive a uniform tax benefit of Rs. 12,500.
  • Reduction in tax rebate : Although middle class salaried people received some tax benefits, the government has cut down its losses by halving the rebate from Rs. 5,000 to Rs. 2,500 for assessed with income up to Rs. 3.5 lakh. So, the effective tax liability even without claiming any chapter VI deductions will still be zero for individuals with income up to Rs. 3 lakh & Rs. 2,500 for those with income between Rs. 3 & Rs. 3.5 lakh.
  • Surcharge : Tax rates have been changed for rich as well. A surcharge of 10% will be applicable for people with income between Rs. 50 lakh to Rs. 1 crore. Super-rich people or those with annual income exceeding Rs. 1 crore will have to pay a surcharge of 15%.
  • Tax benefits slashed for borrowers of home loan : Home loan takers were allowed to offset entire loss arising from interest paid on home loans under any other head of income in the same year. This loss was allowed to be set-off without any limit till March 2017. But budget 2017 has restricted the amount of house property loss, which one can claim against any other income to Rs. 2 lakh max. Any surplus can be carried forward for eight assessment years to be adjusted against rental income only.
  • Aadhaar must for filing ITR & applying for PAN : Now every person will be asked to quote his Aadhaar details while filing taxes. Aadhaar will be mandatory for PAN applications as well. Existing PAN holders will be asked to link their PAN with their Aadhaar.
  • Simplified tax return : This is a significant step taken by the government to simplify tax filing for a large portion of taxpayers. In the next Assessment Year, salaried taxpayers with income up to Rs. 50 lakh & rental income from one house property only can use this simplified form to file their Income Tax Return.
  • Holding period reduced for long term immovable property : Now a property needs to be held only for 2 years for its holding period to be considered long-term. This means that you don’t need to hold the property for 3 years to pay a reduced tax of 20% on its sale.
  • New late filing fee : New late filing fees have been introduced by the government to discourage non-filing of taxes. In the A.Y. 2017-18, late tax filers with income up to Rs. 5 lakh will have to pay Rs. 1,000 as late filing fee. Other late filers may be asked to pay a late filing fee of Rs. 5,000 if they file by 31st December. If they delay it further, the fee can go up to Rs. 10,000.
  • Reduced time period for revised return : The time period given to taxpayers to revise their return has been revised. Earlier, a taxpayer had 2 years in hand to file a revised return which has now been reduced till the end of assessment year or before assessment is completed.
  • Limit on cash transactions : Earlier government had imposed a limit on cash transactions. This limit has again been revised from Rs. 3 lakh to Rs. 2 lakh. Any cash transaction exceeding this limit will be penalised and penalty will be equal to the transaction value.
  • Tax department can now scrutinise past returns beyond 6 years : A new amendment to the I-T Act has been made which empowers tax officials to scrutinise past 10 years’ of Income Tax Returns filed by assessee if undisclosed assets worth over Rs. 50 lakh are found in a search operation.
  • Base year of indexation shifted to 2001 : Along with holding period, changes have been made to the base year used for calculation of indexation of cost. Now base year for calculation will be taken as April 1, 2001 instead of April 1, 1981. This will further reduce your tax liability by reducing your profits on sale.
  • Deduct 5% TDS on rent paid : Those of you who live in a rented accommodation will be required to deduct and submit TDS if your monthly rental payment is more than Rs. 50,000. This will become effective from June 1, 2017 and the rate of TDS will be 5%.
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