Impact Of Union Budget 2017 On Individual Taxpayers

The Union Budget 2017 was announced today and we have some welcome moves in favour of individual taxpayers.

FM reiterated the fact that we are a non-tax compliant nation with some statistics proving this.

• Only 24 lakhs people declare income above Rs 10 lakhs,

• 76 lakhs people declare income above Rs 5 lakhs and

• 99 lakh people declare an income that is below Rs 2.5 lakhs.

• As against this 1.25 crore cars have been sold in the last one year

This signifies the fact that many of us do not declare the correct income.

The following major announcements were made:

Reduction in tax rate for 2.5 to 5 lakhs slab

Tax rates reduced to 5% from 10% on income in the slab 2.5 lakhs to 5 lakhs. This will largely increase the tax compliance as well as the tax base. In order to increase this benefit, the FM also announced that a rebate of Rs 2,500 will now be available to all assesses who earn income up to Rs 3.5 lakhs. This will either reduce their tax liability to zero or at least by 50%. Hence this is a welcome move. Even if you earn up to 4.5 lakhs and exhaust the limit of 1.5 lakhs available in section 80C deductions then you do not pay any tax.

Apart from this, the overall tax liability has been reduced and taxpayers will end up saving Rs 12,500 in taxes. However, there is an exception to this. Anyone earning above Rs. 50 lakhs will be liable to pay a surcharge of 10% on income between Rs. 50 lakhs to Rs. 1 crore.

Under revised slab:

A Person earning Rs. 3L will pay zero tax against (No change for this category)

A Person earning Rs. 3.5L will pay only Rs. 2,500/- (against existing Rs.5,000)

A Person earning Rs. 5L will pay only Rs. 12,500/- (against existing Rs.12,500)

A Person earning Rs. 10L will pay only Rs. 1,12,500/- (against existing Rs.1,25,000)

For people earning above Rs. 50L will have to pay an additional tax of Rs. 3,900 for every increase of Rs. 1L taxable income over Rs. 50L due to imposition of surcharge of 10%

For persons earning above Rs. 1Cr. no major change in the tax liability except saving of Rs. 12,500/-

The catch over here is the person earning Rs. 3.51L will end up paying Rs. 5,050 as taxes.

When it comes to senior citizens they will get a reduced benefit of Rs. 10,000 in taxes and super senior citizens do not get any benefit.

Ease in filing taxes

A one-page ITR Form to be introduced for persons with income below Rs 5 lakhs excepting business income. This move is again aimed at promoting larger tax compliances for small tax filers.

Increase in surcharge

The surcharge of 10% is now applicable on income between 50 lakhs to 1 crore. This will lead to an increased tax of Rs 3,100 (approx.)on every Rs 1 lakh additional income above Rs 50 lakhs. This will bring the high earners under higher tax brackets.

Capital gains taxation

Any land acquired for the purpose of creation of Telangana will now be exempted from capital gains tax.

The holding period for immovable property has been reduced to 2 years from 3 years. This will reduce the capital gains tax liability to a large extent since the exemptions under section 54 can now be claimed for all these assets when they are sold.

The indexation benefit will now be considered from the year 2001 and this might change the calculations of capital gains tax liability that it will reduce.

Reduction in tax litigation and scrutiny

Tax litigation and scrutiny procedures have been eased for first-time tax filers. They will not be subjected to tax scrutiny and litigation if the tax department does not have enough reason to believe this.

Some other key benefits

Senior citizens’ benefits

Aadhar based benefits will now be extended to senior citizens like Aadhar based smart cards, Aadhar based health benefits etc. This will majorly benefit them by making all transactions easy and digital.

Digitisation of the economy

Digitisation will continue to be on the forefront with more transactions going online. The newly launched BHIM App has already been downloaded by 125 lakhs people and increasing by the day. The Government will launch two new schemes to promote the usage of BHIM; these are, Referral Bonus Scheme for individuals and a Cashback Scheme for merchants.

Aadhar Enabled Payment System will soon be launched in order to bring all those who do not have mobile phones, debit cards, wallets etc and help them bring online. These measures will encourage more people to be online. In the longer run, all these measures will curb the circulation of black money and monitoring of transactions by the ITD will be easier.

Cap on cash transactions

Transactions in cash above Rs 3 lakhs will be banned. This step has been basically taken towards curbing cash transactions and reduce black money.

Donations to political parties and charitable institutions

Donations to political parties and charitable institutions in cash will now be restricted to only Rs. 2,000. This move is also directed towards eliminating the rampant black money and cash that is circulated through these routes.

Relief for armed forces as regards pension

Armed forces will now directly receive pension in their accounts through web-based services sparing them the efforts of standing in queues. This is also a step towards digitisation. A dedicated centralised defence travel system has also been set up under which they can book travel tickets online.

-Vaibhav Sankla, Managing Director, H&R Block India