Hit hard by the Modi government’s demonetization drive, the common people’s expectations from the Union Budget 2017 had gone up substantially as they were looking for some sops from the Finance Minister, at least some reduction in tax liability. The FM has finally announced some measures which are likely to give some relief to the taxpayers.
Here are five key takeaways from the Budget for the common man:
Reduction in tax rate: Finance Minister Arun Jaitley has said that the existing rate of taxation for individual assesses between income of Rs. 2.5 lakh and Rs. 5 lakh will be reduced to 5% from the present rate of 10%. This would reduce the tax liability of all persons below Rs. 5 lakh income either to zero (with rebate) or 50% of their existing liability. In order not to have duplication of benefit, the existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs. 2500 available only to assesses upto income of Rs. 3.5 lakh. The combined effect of both these measures will mean that there would be zero tax liability for people getting income upto Rs. 3 lakh per annum. And the tax liability will only be Rs. 2500 for people with income between Rs. 3 and 3.5 lakh.
If the limit of Rs. 1.5 lakh under Section 80C for investment is used fully, the tax would be zero for people with income of Rs. 4.5 lakh. While the taxation liability of people with income upto Rs. 5 lakh is being reduced to half, all the other categories of tax payers in the subsequent slabs will also get a uniform benefit of Rs. 12500 per person. The total amount of tax forgone on account of this measure is Rs. 15500 crore.
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“The FM has given in to strong demands for lower taxes and offered a balm for demonetisation. Those who earn upto Rs 5 lakh will either pay no tax or their tax outgo will reduce to 50%. Our exemption limits have stayed put since a long time. Low income earners have been given relief. Reduction in slab rate to 5% for Rs 2.5L to Rs 5L is applicable to all resulting in minimum tax saving of Rs 12,500 for all. This is likely to boost consumption and put higher disposable income in the hands of taxpayers. This is important for a push post demonetisation and boosting growth,” said Archit Gupta, Founder & CEO ClearTax.com.
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Surcharge on tax payable: A surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs. 50 lakh and Rs 1 crore will be levied. The existing surcharge of 15% of tax on people earning more than 1 crore will continue. This is likely to give additional revenue of Rs. 2700 crore.
No scrutiny in the first year: A simple one page form to be filed as Income Tax Return will be made for the category of individual having taxable income upto Rs. 5 lakh other than business income. A person of this category to file Income Tax Return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high value transactions. Mr Jaitley appealed to all citizens of India to contribute to Nation Building by making a small payment of 5% tax if their income is falling in the lowest slab of Rs. 2.5 lakh to Rs. 5 lakh.
No cash transactions beyond Rs 3 lakh: Now you won’t be able to do any cash transaction beyond Rs 3 lakh soon. It is proposed to provide that no person shall receive payment or aggregate of payments of an amount of Rs 3 lakh or more from a person in a day, or in respect of a single transaction, or in respect of transactions relating to one event or occasion, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account. This restriction, however, shall not apply to government, banks or certain other categories as notified by the Central government. Contravention of this provision will invite penalty.
Boost for affordable housing: With his Budget proposals, the FM has given a big boost to affordable housing which will benefit the common man going ahead. The affordable housing segment, for instance, has been granted infrastructure status. The move to measure the areas in affordable housing projects – 30 sq mts for the projects in municipal limits in the 4 metros, and 60 sq mts for the rest of India, on carpet area as against the earlier built-up area, will translate into homes that are 30 per cent larger.
“This should amplify the interest of developers further, to build more affordable projects, thereby, increasing supply. 100% deduction for profits, for affordable housing projects which earlier needed to be completed in three years, now have to be completed in five years; will bring relief to developers plagued by approval issues. A one year tax break for unsold inventory that has received the CC, will bring some relief to developers. The move to abolish FIPB, indicates further liberalisation of the FDI policy, something that the finance crunched sector would welcome. Long-term capitals gains tax benefit which could be availed after three years, can now be availed after two years, which would please investors and home buyers alike,” said Sunil Mishra, Chief Strategy Officer, PropTiger.com.