Blog

• The government made a very important announcement for people living in metropolitan cities. Now people staying in rented accommodation paying more than Rs. 50,000 per month as rent are required to deduct tax on behalf of their landlord. Government has taken this step to widen its tax net. However, this has put additional tax compliance burden on the rent payers.
• It has proposed to introduce a new section, 194-IB in the Income Tax Act to provide that an individual or a HUF (other than those covered under 44AB of the Act), responsible for paying rent to a resident exceeding Rs. 50,000 for a month or part of month during the previous year, shall deduct an amount equal to 5% of such payment as income-tax thereon. The following amendment will take effect from the date budget gets the final approval from the President of India.
• Further, a proposal has been made in the Act that tax shall be deducted on such payment at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. It is also proposed to provide that tax so deducted shall be deposited only once in a financial year through a challan-cum-statement to be notified soon.

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• As we are approaching towards the end of this financial year, there are certain things we should do before the year comes to an end.

1. File pending IT for financial year 2015-2016 to avoid penalty

• Though the general due date of filing of income tax returns is 31st July of the year following the financial year, a few of us wouldn’t have been able to file the return by the due date and then must have forgotten the matter altogether. Please file your pending income tax return for the financial year 2015-2016 by 31st March 2017. In case you have taxable income and fail to file the returns for the financial year 2015-2016 by 31st March 2017, the assessing officer can levy a penalty of Rs. 5,000 for this default. However, the assessing officer cannot do so without giving you an opportunity to explain the reason for such failure.
• If the return has not been filed by due date, you cannot revise the return later on. So be very careful while filing the return and ensure that all the particulars are correctly stated and all the income is correctly included in the return. Note that in case the tax payable in respect of any of the returns which you are planning to file now, was not paid either as advance tax or TDS, you may have to pay the interest for non payment of advance tax as well as for delay in filing of income tax return @ 1% for each of the default. So effectively if adequate tax was not paid earlier you land up paying exorbitant interest @ 2% for each month of the delay.

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• The government made several tax proposals aimed at the housing and infrastructure sector. But apart from vowing pukka houses for the masses, an important announcement too was made, which has the potential to change the way taxes are levied on buying and selling houses.
• If assets are held for long-term one can adjust the purchase price in accordance with inflation to reduce the tax applicable. This period of long-term differs from one asset to another. For debt-mutual funds it is 36 months and for unlisted shares it is 24 months, while for listed shares it is 12 months.
• So, far immovable property should have been held for 36 months to be considered long-term. The Union Budget 2017-18 proposes to shrink this period to 24 months as well, in line with unlisted shares.

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• The 50 days of demonetization are behind us and so is the deadline to deposit and convert the demonetized currencies of Rs. 500 and Rs 1000. If you have deposited cash up to Rs. 2.5 lakh in your account, there is no cause for worry as per the government directive. However, if your deposit amount exceeds Rs 2.5 lakh, you may get a notice from the Income Tax Department.
• Most of the people get queasy when it comes to deal with income tax department. This article is an effort towards discussing how to handle the income tax notice after November 8.

Who may get an IT notice?

• As per government’s directive, banks have been asked to furnish details of all individuals who have deposited more than Rs. 2.5 lakh in their savings account or opened fixed deposits. It has also asked banks for information on deposits of more than Rs. 12.5 lakh in current accounts. Banks send these details to tax authorities, which in turn may issue a notice if necessary.
• At the same time, if you have bought big-ticket items such as gold or a car, you may get a notice from tax authorities. The government has asked all car dealers to furnish details of their transactions if there is a spike in the volume of business after the demonetization announcement. Similarly, jewellers have been asked to provide details of business transactions that transpired after November 8.

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• The much anticipated Union Budget 2017 was finally announced today by our honourable Finance Minister. It was broadly focused on 10 issues — farming sector, rural population, youth, poor and health care for the underprivileged, infrastructure, financial sector for stronger institutions, speedy accountability, public services, prudent fiscal management and tax administration for the honest. Here is what it brought for personal Income Tax payers and corporate taxpayers.

Personal Income Tax:

• Any person who files his tax return for the first time will not be scrutinised unless the tax department has specific information encouraging scrutiny.
• The government will simplify tax filing by introducing a new ITR form for taxpayers with income up to Rs. 5 lakhs.
• The government has proposed to levy a surcharge of 10% for persons having income between Rs. 50 lakhs and Rs. 1 crore.
• The government has not changed Income Tax exemption limit but reduced tax rate to 5% for persons having income between Rs. 2.5 lakhs to Rs. 5 lakhs.
• On the down side the budget 2017 has proposed to restrict the benefit of set-off loss from house property to a maximum Rs. 2 lakh per financial year and the balance loss can be carried forward to next 8 years

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