Apr 20, 2017

Before you Make Tax Declarations, See This.


These changes in Budget 2017 should be taken into consideration while making declarations for the F.Y. 2017-18. Try to take the things into consideration at the beginning of the year, so that you do not face issues during the end of financial year and save on your tax outflows.

1) The tax rate on income between Rs. 2.5 lakh and Rs. 5 lakh has been halved to 5 per cent from 10% per cent. However, rebate under Section 87A gets reduced from Rs. 5,000 to Rs. 2,500. And no rebate will be applicable for taxpayers having income above Rs. 3.5 lakh.
2) A 10 per cent surcharge will be applicable for individuals having income ranging from Rs. 50 lakh to Rs. 1 crore (existing surcharge of 15 per cent will remain the same for individuals having income above Rs. 1 crore). However, those with taxable income of above Rs. 50 lakh get the benefit of marginal relief. The concept of marginal relief is designed to provide some relief in levy of surcharge to a taxpayer where the total taxable income marginally exceeds Rs. 50 lakh or Rs. 1 crore.
3) No deduction will be allowed for investment in Rajiv Gandhi Equity Saving Scheme, which has been scrapped this year. This tax-saving scheme was designed exclusively for the first-time individual investors in the securities market with gross total income below a certain limit.
4) The government has cut down tax benefits borrowers enjoyed on properties, other than self-occupied. For properties rented out, a borrower could deduct the entire interest paid on home loan after adjusting for the rental income. On the other hand, borrowers of self-occupied properties get a deduction of Rs. 2 lakh on interest repayment on home loan. But from this year, the borrower can only claim a deduction of up to Rs. 2 lakh per year after adjusting for the rental income.
5) And the amount above Rs. 2 lakh can be carried forward for eight assessment years. Since the interest component of home loan repaid in initial years is higher, experts say that the borrower may not be able to fully adjust the interest paid as deduction even in subsequent years.
6) Individuals are required to deduct a 5 per cent TDS (tax deducted at source) for house rent payments above Rs. 50,000 per month. Tax experts say that the move will ensure that persons who get a large rental income come into the tax net. It will be effective from June 1, 2017.
7) The holding period of a property for qualifying as long-term capital gains has been reduced to two years, from three years. This will help save tax if a property is sold after two years of buying. If a property is sold before two years, the profit from the transaction will be treated as short-term capital gains and will be taxed according to the slab rate applicable to him/her.
 
8) Along with the reduction in the holding period to two years, the base year for calculating indexation of cost has also been changed. The base year has been shifted from 1981 to 2001.
9) Under the Pradhan Mantri Awas Yojana (Urban) for middle-income groups, home loan borrowers buying their first home are eligible for subsidy on interest repayments. Home loans sanctioned or applications are under consideration since January 1, 2017, are eligible for interest subsidy under the Credit Linked Subsidy Scheme for Middle Income Groups. The beneficiary earlier should not have own a house in his/her name.

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