1. Union Budget 2017: 4 things that can impact your savings and increase tax liability

Union Budget 2017: 4 things that can impact your savings and increase tax liability

Although the Budget 2017 was pro-poor and some tax sops were also announced keeping in mind the middle class, but still a few amendments will have a negative impact on people after the changes become effective within a few months. For instance, they will increase the tax liability of the rich people.

By: | Updated: March 17, 2017 7:08 PM
Budget 2017, budget, arun jaitley, finance bill, savings, employees, income tax department, income tax act The government in the current budget announced an additional surcharge of 10% for salaried employees who are earning more than Rs 50 lakh and less than Rs 1 crore.

Although the Budget 2017 was pro-poor and some tax sops were also announced keeping in mind the middle class, but still a few amendments will have a negative impact on people after the changes become effective within a few months. For instance, they will increase the tax liability of the rich people.

In his budget speech, the FM had said, “The present burden of taxation is mainly on honest taxpayers and salaried employees.” Keeping this in view, he tried to disperse the tax liability on everyone so that there is a uniformity in paying tax amongst all.

Introduction of additional Surcharge of 10%

The government in the current budget announced an additional surcharge of 10% for salaried employees who are earning more than Rs 50 lakh and less than Rs 1 crore. The taxpayers whose taxable income falls between Rs 50 lakh and Rs 1 crore will not benefit much because the imposition of a surcharge of 10% will not only wipe away the benefit of Rs 12,500, but also it will impose an additional tax burden on such taxpayers.

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Reduction in rebate limit under Section 87A

Reduction in rebate from Rs 5000 to Rs 2500 under Section 87A has a slightly negative impact where the eligibility limit has been reduced up to 50%. Moreover, the taxable salary limit for claiming such deduction has also decreased from Rs 5 lakh to Rs 3.5 lakh.

Now, taxpayers who are earning taxable income between Rs 2.50 lakh and Rs 3.50 lakh will get a rebate of Rs 2,500 only under section 87A as against the earlier rebate of Rs 5,000 for the taxpayers whose taxable income was up to Rs 5 lakh.

Restriction on set off of loss being capped on the higher side

In the Budget 2017, section 71 of the Act relates to set-off of loss from one head against income from another. To have best practices, it is proposed to insert sub-section (3A) in the current section to provide that “set-off of loss under the head “Income from house property” against any other head of income shall be restricted to Rs 2 lakh for any assessment year,” as per the Finance Bill 2017.

One the biggest negative impacts will now be held against set off of loss for Income from House Property which now has been capped at Rs 2 lakh per F.Y with effect from 1st April 2018. Your income tax liability may increase because of this capping. Keeping other factors constant, suppose you are earning a rental income of Rs 2 lakh and paying interest of Rs 7 lakh towards the loan, this will result in loss of Income from House Property of Rs 5 lakh. Earlier, you could have set off the entire amount against income from the other heads.

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Penalty on delay in filing income tax returns

In the current budget, it has been firmly announced that if somebody fails to file one’s income tax returns on or before the due date, one is liable to pay a penalty of certain amount. More precisely, if you file your return after the due date and before 31st December, the penalty is Rs 5000. And if you file returns after 31st of December, the penalty in such case is Rs 10000. Moreover, you will not be able to file returns after 31st of March (of next year). However, if your taxable income is less than Rs 5 lakh, the penalty will be capped at an upper limit of Rs 1,000.

  1. J
    J.venkatarao
    Feb 15, 2017 at 8:31 am
    An individual with income of ₹350,000 has to pay a tax of ₹2500 while other with an income of₹360,000 has to pay ₹5500, That's is ₹3,000 more on extra income of just ₹10,000/-.This is injustice. Let FM look into this anomoly.
    Reply
    1. H
      Hari
      Feb 21, 2017 at 7:42 am
      BMC is a den of corruption where corrupt politicians are only interested in looting resources of BMC worth Rs 40000 crores per annum. None of the political parties are serving for the welfare of public but only interested in making money by abusing power. These corporations are creating thousands of corrupt politicians who are the biggest liability for the country. CM, Maharastra has exposed Shiv Sena for looting BMC FUNDS while giving interview with different news channels but he has not made any efforts to curb mive corruption prevailing in BMC by taking direct control under state govt to stop all types of bickering and teaching lesson to Shiv Sena leaders who are talking tall on basis of looted wealth earned by them by misusing power in BMC. Modi govt has promised to curb corruption all over the country before LOK SABHA ELECTIONS but nothing happened to promise made to billions of people. Now BJP is also following a path of Congress in promoting corruption. This is the main reason for humiliating defeats for BJP in Bihar, Delhi etc which will be repeated in coming embly elections as regional parties run by individual leader amed huge wealth and are in commanding position to defeat BJP in embly elections and the results of UP will reveal full facts on 13th March 17. In view of above facts, Modi govt should take urgent remedial measure by taking all corporations directly under state govt. ONLY THEN SWATCCH ABHIYAN WILL BE SUCCESSFUL IN OUR COUNTRY. BJP govt must amend ANTI-CORRUPTION LAW BY MAKING IT NON-BAILABLE AND LIFE SENTENCE ALONG WITH SEIZURE OF ALL ETS. ONLY THEN THIS COUNTRY CAN CURB CORRUPTION TO MAXIMUM EXTENT.WHY MODI GOVT HAS PUT BURDEN ON COMMON MAN BY LEVYING 0.5% TAX ON INCOME TAX FOR SWATCCH ABHIYAN? BUT NO EFFORTS ARE MADE TO CURB CORRUPTION IN CORPORATIONS ALL OVER COUNTRY BY KEEPING IT UNDER DIRECT CONTROL OF STATE GOVT. ONLY DRAMA OF SWATCCH ABHIYAN IS LAUNCHED WITHOUT CURBING RAMPANT CORRUPTION OF CORPORATIONS WHICH IS A JOKE TO FOOL PUBLIC OF COUNTRY.
      Reply
      1. T
        t p
        Feb 15, 2017 at 12:09 pm
        Tax anomolies / variations /disparieties should be reduced & further simplification is needed. new slab with 10 % , 15 % be introduced.
        Reply

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