On February 1, 2017 the government unveiled the much-awaited Budget of 2017. The changes made in the said budget will be applicable from April 2017 onward and as March draws to an end, it is time to understand the new provisions applicable for the new financial year.

For individuals earning income upto Rs 5 lakh

As per the Budget Speech, of among 3.7 crore individuals who file their income tax returns, almost half of them (1.9 crore) show taxable income between Rs 2.5 lakh to Rs 5 lakh. Since most of the individuals falling within this tax bracket are mainly tax compliant, the government has reduced the tax rate applicable to them from 10% to 5%.

This move to reduce the slab rates will also be beneficial to individuals earning taxable income of more than Rs 5 lakh. Their overall tax liability will be reduced by Rs 12,500.

Further, with a view to ease compliance, a simple one-page income tax return form will be made available for individuals having taxable income (other than business income) up to Rs 5 lakh. Further, to encourage tax compliance, the FM has assured that no scrutiny will be initiated on individuals filing income tax return for the first time in this category unless there is specific information available with the department regarding high value transactions.

Surcharge for individual earning income more than Rs 50 lakh

In order to make up for the loss due to reduced slab rates, the FM has levied a surcharge of 10% on taxpayers whose income is above Rs 50 lakh. Surcharge of 15% on income above Rs 1 Crore will continue to be levied.

Individual paying rent of more than rupees fifty thousand

A new section 194IB is introduced to cast a duty on individuals to deduct tax at source @ 5 percent of rent paid by them in case the amount of the rent exceeds Rs. 50,000 per month. The said section will be effective from June 1, 2017. The said taxes will need to be deposited into the government treasury through a challan-cum-statement and no separate TDS return is required to be filed by such individuals.

However, if the landlord does not furnish his PAN, the TDS rate will be 20%.

Setoff of loss under the head house property

By an amendment to Section 71, it is proposed to restrict the set-off of loss under the head “income from house property� against income under any other head during the current year up to Rs 2 lakh. The loss not so set-off would be allowed to be carried forward for set-off against house property income for eight assessment years. This will adversely impact those cases where on account of high interest on borrowings were suffering a loss on income from house property.

For individuals planning to sell their property

With a view to encourage mobility of assets, two key changes have been made in the capital gain taxation provision.

The holding period of any immovable property to qualify as a “Long term capital asset� has been reduced from 36 months to 24 months. Accordingly, an individual selling house after holding it for more than 24 months can now claim indexation benefit. Further, the base year for calculating indexation has been shifted from 1981 to 2001.

This dual move will significantly reduce the capital gain tax payable by individuals on transfer of property.

Self-employed individuals

The threshold limit for maintenance of books of accounts for individuals under section 44AA of the Act has been increased from turnover of Rs 10 lakh to Rs 25 lakh or from income of Rs 1.2 lakh to Rs 2.5 lakh.
Late filing of tax return

Although the government gives sufficient time for filing tax returns, many taxpayers file returns after the due date. In order to discourage late filing of returns (after due date) and to comply with filing on time, a new section 234F has been inserted from April 1, 2017.

An additional fee will be levied if return of income is filed after the due date without reasonable cause. The additional fees will be Rs 5,000 if the return is filed before December 31 of that assessment year and Rs 10,000 in any other case.

While presenting the tax proposals in the budget, our honorable Finance Minister presented a simple statistic demonstrating the vast contrast between income reported by individual in their tax return vis-a-vis money spent by them on purchase of cars and trips taken abroad. From these statistics, the Finance Minister concluded that India is largely a tax non-compliant society. With the new tax provisions, the Finance Minister hopes to ease compliances for honest tax payers, improve monitoring of income and ensure overall healthy tax environment.