Income Tax 2017 Updates as per India Finance Bill

With the recent demonetization program, everyone is keeping a keen eye out for the Finance Bill and any changes that impact the economics of trade for the country. Among many other changes being called out, we have the Indian Finance Minister sharing the changes in the India Finance Bill for this year. This post tries to highlight the Income Tax-specific changes along with few others that impact all of us.

The proposed key tax amendments are as follows:

(I).Income Tax:

A.   For Employees:

1.    Existing rate of income tax on income between Rs 250,000 – Rs 500,000 reduced  to 5%  from 10%. All other employees in subsequent income brackets will also get tax benefits of Rs 12,500.

So, the income-tax slab for FY 2017-18 is as follows: 

Income Slab:                                                  Tax rate

Income up to Rs 250,000  ………………..…….No Tax

From Rs 250,001 to Rs 500,000   ……………..5% of the amount by which the total income  exceeds Rs 250,000

From Rs 500,001 to Rs 1,000,000……………..Rs 12,500+ 20% of the amount by which the total income  exceeds Rs 500,000

Above Rs 1,000,000……………………………..Rs 112,500 + 30% of the amount by which the total income  exceeds Rs 1,000,000

 However, Tax relief under section 87A available to a resident Individual, if his total income does not exceed Rs. 3,00,000, is proposed to be decreased from Rs 5,000 to Rs 2,500 (100% of income-tax or Rs.2,500 whichever is less). Therefore, an individual earning taxable income up to Rs 300,000, he/she does not pay any tax.

2.    Education Cess (@ 3%) will continue to be applicable on Income tax amount.

3.    Surcharge @ 10% on tax is proposed to be levied on Individuals earning income more than Rs 50 lacs, but not exceeding Rs.1 Crore annually.

4.    ‘Super Rich’ Surcharge on tax ( @ 15%) continues to be applicable for Individuals earning income more than Rs 1 Crore .

5.    No Change in amount of deduction for Interest on Housing Loan u/s 24.  So, total deduction for housing loan interest remains at Rs. 200,000 per co-owner.

6.      Foreign listed shares ( like shares of Akamai US) will continue to be short-term Capital Asset if it is held for less than 24 months. These shares will become long term capital asset if it is held for more than 24 months.

7.    Time limit for Tax Assessments is reduced from 21 months to 18 months, however, Re-Assessment time limit increased to 12 months: Section 153 is amended as follows:

“(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of Eighteen months from the end of the assessment year in which the income was first assessable.

(2) No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of Twelve months from the end of the financial year in which the notice under section 148 was served.

       8. Advance tax payable by all assesses ( wef June 1, 2016) remains SAME as follows:

Due date of installment                                                 Amount payable

On or before the 15th June                           Not less than fifteen per cent. of such advance tax.

On or before the 15th September                Not less than forty-five per cent. of such advance tax, as reduced by the amount, if any, paid in the earlier installment.

On or before the 15th December                 Not less than seventy-five per cent. of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier installment or installments.

On or before the 15th March                       The whole amount of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier installment or installments;

9. Under Section 10( 12B): Partial NPS withdrawal is exempted to the extent that it does not exceed 25% of contribution made by employee.

10. Under Section 13A & 80G: Political contribution by cash can be made up to Rs 2000/- only.

11. Under Section 80CCD(1)(b), NPS contribution has been proposed to be increased from 10% to 20%.

12. Deduction under section 80CCG( Equity saving schemes) is proposed  to be removed/deleted.

13. Section 194-IB introduced….wef June 1, 2017… Individuals or HUF paying RENT( including house rents) of more than Rs 50,000 per month require to deduct tax at source @ 5% on such rental income.

 14. New Section 234F is introduced relating to Fee for default in furnishing return of income. This section state as follows:

(1) Without prejudice to the provisions of this Act, where a person required to furnish a return of income under section 139, fails to do so within the time prescribed in sub-section (1) of said section, he shall pay, by way of fee, a sum of,—

(a) five thousand rupees, if the return is furnished on or before the 31st day of December of the assessment year;

(b) ten thousand rupees in any other case:

Provided that if the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

(2) The provisions of this section shall apply in respect of return of income required to be furnished for the assessment year commencing on or after the 1st day of April, 2018..

In Summary, after considering the above tax proposals by Finance Bill 2017, the overall deductions available under some of the key provisions of the tax law are as follows:

 Note: Also, other deductions under sections 80CCD(2),  80DD, 80DDB,80E, 80G & HRA deductions will continue to be available!!!

(II).Service tax: Service tax rate including Swachh Bharat Cess & Krishi Kalyan Cess will remain at 15%.

(III) GST law is expected to be effective from July 1, 2017.

Disclaimer – The above has been compiled using the Financial communication to Indian employees of a leading Multi-national Product Company.