Want to know how the changes in income tax rules in 2017 affect you?
Don't have the time or inclination to plow through all the details? Do not worry – we have presented a quick summary of the specific provisions of this year's budget that affect you and your pocket. Provisions/changes in personal income tax are invariably the most eagerly awaited part of the Budget announcement. Following is an overview:
• The most dramatic change is the halving of the income tax rate from 10% to 5% for those with an annual income of between 2.5-5 lakhs.
• Other segments will enjoy a uniform benefit of Rs. 12,500 per person, so whatever your tax bracket is, you will receive this extra money.
• Those with an annual income of between Rs50 lakhs–1 crore per annum have to pay an additional surcharge of 10%. The 15% surcharge on those with an income above Rs. 1 crore remains.
Income Tax 2017 – how do the new provisions affect you?
• If your total annual income is between Rs 2.5 - 5 lakhs, your tax rate is halved from 10% to 5%.
• If you earn less than Rs. 3 lakhs per annum, you will not pay any income tax (as a result of the changes in the tax rate and rebates).
• If your income is between 3-3.5 lakhs, your tax liability will only be Rs. 2500.
• If your income is Rs. 4.5 lakhs and you use the limit of Rs 1.5 lakh under Section 80C for investment fully, your tax would be zero.
• All the other categories of taxpayers in the subsequent slabs will also get a uniform benefit of Rs 12,500 per person. So, any which way, you will have a handy extra Rs. 12,500 in your pocket if you have an annual income of more than Rs. 5 lakhs!
• Those with an income between Rs. 50 lakhs – Rs. 1 crore will need to pay a surcharge of 10%.
• The definition of 'long term' holding period for the immovable property is reduced from 3 to 2 years. This means immovable property held for only 2 years is taxed at the reduced rate of 20 percent and eligible for various exemptions on reinvestment. You can avail of tax exemption on reinvestment of capital gains in notified redeemable bonds, in addition to investment in NHAI and REC bonds.
• Corporate tax rate reduced from 30% to 25% for MSME firms (those with a turnover of below Rs. 50 crores).
Filing IT returns – no scrutiny for first timers:
• There will be no tax scrutiny for first-time return filers with income of less than Rs 5 lakhs. You will only need to fill out a simple one page IT return to form rather than the tedious paperwork even for small taxpayers in the past.
• Keep in mind that late filing of tax returns can incur fines between Rs 5000–Rs. 10,000 depending on how late your file. So, make sure you have your taxes done on time. Those with an income of less than Rs. 5 lakhs will need to pay only Rs. 1000 for late filing.