Changes Brought About in Income Tax in the Union Budget of 2018
Finance Minister, Arun Jaitley, in the Union Budget 2018 session yesterday (1 February) proposed five new changes to be incorporated to the existing standards of the Income Tax Department:
- A 1% increase in the cess of the corporation and personal income tax was proposed by the Finance Minister in the session yesterday. From an earlier 3%, the cess has now been increased to 4%. This, in turn, will spiral the total income tax paid by a taxpayer, every year.
- Salaried individuals, henceforth, will get a Rs.40,000 deduction on their incomes, thereby replacing the existing exemption permitted on reimbursement of medical costs and transportation allowances. Around 2.5 crore salaried individuals are believed to benefit from this move and the total cost incurred by the Government would amount to Rs.8,000 crore. In the year 2006-07, standard deductions on incomes were abolished, although soon after the concept was brought back into action. Standard deduction essentially comprises of deduction of a certain amount of money from the salaried individual’s income to cope with expenses that the person would incur during his employment in the organization.
- The Union Budget 2018 introduced a new 10% tax charged on investments of long-term capital gains in stocks and equity mutual funds. Contradicting hugely from its existing standard of tax exemption, the new tax law states that all profits exceeding the amount of Rs.1 lakh (from mutual funds and stock markets) will henceforth be taxed a 10% rate. However, long-term capital gains that have been invested in stocks and mutual funds up until January 31, 2018 will be exempted from any tax deduction.
- The Finance Minister in the session of Union Budget 2018 held yesterday also introduced a 10% tax rate on distributed income earned from equity-based mutual funds.
- Concerning the senior citizens of the country, the Indian government has established a lot of changes that will help minimize their financial burden:
- The exemption of interest income on prepayments made in banks and post offices has been increased to Rs.50,000 from an earlier Rs.10,000.
- Under Section 80D, the deduction limit for premiums paid on health insurances or other medical expenditures has been increased to Rs.50,000 from an existing amount of Rs.30,000.
- No deduction of TDS under Section 194A. Availability of benefits for interest received from recurring and fixed deposit schemes.
New Income Tax Changes from April 1 by Income Tax Department
In the Budget of 2017, several changes related to income tax were announced. These changes will come into effect from April 1, 2017. Some of the important changes are as follows:
- The income tax rate for people earning Rs.2,50,000 to Rs.5 lakh per year has come down to 5%, but people earning over Rs.50 lakhs p.a. will have to pay an additional surcharge along with the applicable tax rate. The surcharge is 10% for people earning an income of Rs.50 lakhs to Rs.1 crore and the surcharge is 15% for people earning an income of over Rs.1 crore.
- Filing of ITR will become easy for people earning up to Rs.5 lakhs as the government will introduce a simplified 1-page form for them. People who file their ITR using this form for the first time will not be scrutinized by the Income Tax Department.
- No deductions can be claimed for investments made under the Rajiv Gandhi Equity Saving Scheme from AY (Assessment Year) 2018-2019.
- People will have to pay a penalty of Rs.5,000, if they do not file ITR for the present FY (Financial Year) on time (latest by December 31). If they file after December 31, the fine amount will increase. The fine is capped at Rs.1,000 for people who earn up to Rs.5 lakhs annually.
- According to a report by Economic Times, the holding period for a long-term immovable property has been reduced to 2 years. It was 3 years before. Also, if such property is held beyond 2 years, it will be taxed at 20% and will be eligible for reinvestment and exemptions.
- In case of long term capital gains tax, the base year for cost indexation has been changed from April 1, 1981, to April 1, 2001. Tax exemption will be available, if people re-invest in some selected redeemable bonds. The exemption will also be available for investments in REC and NHAI bonds.
- From June 1, 2017, people whose rental payments are more than Rs.50,000 per month have to subtract 5% TDS.
- From July 1, 2017, people will not be able to file their ITR without Aadhaar.
- People who make partial withdrawals from NPS (National Pension System) do not have to pay tax on the same. They can withdraw 25% of their own contribution before retiring in case of emergencies.
- Health, Two-wheeler and Car insurance premiums may increase from April 1, 2017.
- People who do not keep a minimum of Rs.5,000 per month in their SBI accounts will have to pay penalty from April 1, 2017.
Apart from these, there are other changes that will be introduced. People are advised to keep themselves updated about these changes as they may have a direct impact on their income tax.
Income tax slab for individual tax payers & HUF (less than 60 years old) (both men & women)
| Income Slab | Tax Rate |
|---|---|
| Income up to Rs. 2,50,000* | No Tax |
| Income from Rs. 2,50,000 – Rs. 5,00,000 | 5% |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Income more than Rs. 10,00,000 | 30% |
| Surcharge: 10% of income tax, where total income is between Rs. 50 lakhs and Rs.1 crore. 15% of income tax, where total income exceeds Rs. 1 crore. | |
| Cess: 3% on total of income tax + surcharge. | |
| * Income upto Rs. 2,50,000 is exempt from tax if you are less than 60 years old. | |
Income tax slab for individual tax payers & HUF (60 years old or more but less than 80 years old) (both men & women)
| Income Slab | Tax Rate |
|---|---|
| Income up to Rs. 3,00,000* | No Tax |
| Income from Rs. 3,00,000 – Rs. 5,00,000 | 5% |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Income more than Rs. 10,00,000 | 30% |
| Surcharge: 10% of income tax, where total income is between Rs. 50 lakhs and Rs.1 crore. 15% of income tax, where total income exceeds Rs.1 crore. | |
| Cess: 3% on total of income tax + surcharge. | |
| * Income up to Rs. 3,00,000 is exempt from tax if you are more than 60 years but less than 80 years of age. | |
Income tax slab for super senior citizens (80 years old or more) (both men & women)
| Income Slab | Tax Rate |
|---|---|
| Income up to Rs. 2,50,000* | No Tax |
| Income up to Rs. 5,00,000* | No Tax |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Income more than Rs. 10,00,000 | 30% |
| Surcharge: 10% of income tax, where total income is between Rs. 50 lakhs and Rs.1 crore. 15% of income tax, where total income exceeds Rs.1 crore. | |
| Cess: 3% on total of income tax + surcharge. | |
| *Income up to Rs. 5,00,000 is exempt from tax if you are more than 80 years old. | |
- Income Tax Slab for Individuals and Hindu Undivided Families:
These are the slab rates for FY 2016-17 (AY 2017-18) These income tax slab rates are also applicable for : FY 2015-16 (AY 2016-17) FY 2014-15 (AY 2015-16)
On all the tables listed below, Education Cess of 2% and SHEC of 1% will be levied on the tax computed using the rates given below.
Under Section 87(A), an Income Tax Rebate of Rs.2,000 is provided for all individuals earning an income that’s less than Rs.5,00,000 per annum.
- Tax applicable for individuals below 60 years
| Annual Income | Tax Rates | Education Cess | Secondary and Higher Education Cess |
|---|---|---|---|
| Up to Rs.2,50,000 | Nil | Nil | Nil |
| Rs.2,50,001-Rs.5,00,000 | 5% | 2% of income tax | 1% of income tax |
| Rs.5,00,001-Rs.10,00,000 | Rs.12,500 + 20% | 2% of income tax | 1% of income tax |
| Above Rs.10,00,000 | Rs.1,12,500 + 30% | 2% of income tax | 1% of income tax |
- Tax applicable for individuals over 60 years and under 80 years
| Annual Income | Tax Rates | Education Cess | Secondary and Higher Education Cess |
|---|---|---|---|
| Up to Rs.3,00,000 | Nil | Nil | Nil |
| Rs.3,00,001-Rs.5,00,000 | 5% | 2% of income tax | 1% of income tax |
| Rs.5,00,001-Rs.10,00,000 | Rs.10,00 + 20% | 2% of income tax | 1% of income tax |
| Above Rs.10,00,000 | Rs.1,10,000 + 30% | 2% of income tax | 1% of income tax |
- Tax applicable for individuals over 80 years and above
| Annual Income | Tax Rates | Education Cess | Secondary and Higher Education Cess |
|---|---|---|---|
| Up to Rs.5,00,000 | Nil | Nil | Nil |
| Rs.5,00,001-Rs.10,00,000 | 20% | 2% of income tax | 1% of income tax |
| Above Rs.10,00,000 Rs.1,12,500 | Rs.1,00,000 + 30% | 2% of income tax | 1% of income tax |
Income Tax should be deducted at applicable rates as above along with surcharge and Education Cess. The individuals who are earning over Rs.50 lakh and under Rs.1 crore will be required to pay a surcharge of 10% tax on the total income and the individuals who are earning over Rs.1 crore, a surcharge of 15% will be applicable as the income tax.
- Businesses:
The following tables indicate the tax slabs for businesses.
- Income Tax Slab for Co-operative societies :
| Income Tax Slab | Tax Rates |
|---|---|
| Total income less than Rs.10,000. | 10% of the income. |
| Total income greater than Rs.10,000 but less than Rs.20,000. | 20% of the amount by which it exceeds Rs.10,000. |
| Total income greater than Rs.20,000. | 30% of the amount by which it exceeds Rs.20,000. |
- Firms, Local Authorities, Corporates and Domestic Companies:
- Income tax slab rates do not apply for these, as they are taxed at a flat rate of 30% on the total income declared.
- A surcharge of 5% is levied on the total income tax of domestic companies if their income exceeds Rs.1 crore. This surcharge does not apply to firms and local authorities.
Income Tax Refund
The government provides an option to save on tax amount by making certain kind of investments. These kinds of investments can be declared for tax exemption under Section 80C and 80D. The Section 80C allows an individual to reduce up to Rs.1,50,000 as investment amount that can be claimed from the annual income. The Section 80D deals with the tax deduction on medical insurance for up to Rs.25,000 for a financial year.
Tax Due Dates for the Month of May
| May | 7th May, 2017 –
The due date for deposit of Tax collected/deducted for the month of April, 2017. All sum collected/deducted by an office of the government shall be paid to the Central Government on the same day of transaction where tax is paid without producing an Income-tax Challan. 15th May, 2017 –
30th May, 2017–
31st May, 2017 – The quarterly statement of TDS deposited for the quarter ending March 31, 2017.
|
Income Tax Return (ITR):
If an individual need to claim for income tax refund, he/she will need to fill up the required Income Tax Return (ITR) form. Depending on the income assessment group, the individual will need to submit one of the ITR forms listed below:
| ITR Form Name | Description |
|---|---|
| ITR-1 | For Individuals having Income from Salaries, One house property, Other sources (Interest etc.) |
| ITR-2 | For Individuals and HUFs not having Income from Business or Profession |
| ITR-2A | For Individuals and HUFs not having Income from Business or Profession and Capital Gains and who do not hold foreign assets |
| ITR-3 | For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship |
| ITR-4 | For individuals and HUFs having income from a proprietary business or profession |
| ITR-4S | Presumptive business income tax return |
| ITR-5 | For persons other than,- (i) individual, (ii) HUF, (iii) company and (iv) person filing Form ITR-7 |
| ITR-6 | For Companies other than companies claiming exemption under section 11 |
| ITR-7 | For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F) |
| ITR-V | The acknowledgment form of filing a return of income |
Income Tax Forms
The most frequently used Income Tax Forms are:
| Form | Description |
|---|---|
| Form No. : 3CA | Audit report under section 44AB of the Income-tax Act, 1961 in a case where the accounts of the business or profession of a person have been audited under any other law |
| Form No. : 3CB | Audit report under section 44AB of the Income-tax Act, 1961, in the case of a person referred to in clause (b) of sub-rule (1) of rule 6G |
| Form No. : 3CD | Statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 |
| Form No. : 3CEB | Report from an accountant to be furnished under section 92E relating to international transaction(s) |
| Form No. : 10A | Application for registration of charitable or religious trust or institution under section 12A(1)(aa) of the Income-tax Act, 1961 |
| Form No. : 10B | Audit report under section 12A(b) of the Income-tax Act, 1961, in the case of charitable or religious trusts or institutions |
| Form No. : 15CA | Information to be furnished for payments, chargeable to tax, to a non-resident not being a company, or to a foreign company |
| Form No. : 15CB | Certificate of an accountant |
| Form No. : 15G | Declaration under sub-sections (1) and (1A) of section 197A of the Income-tax Act, 1961, to be made by an individual or a person (not being a company or a firm) claiming certain receipts without deduction of tax |
| Form No. : 15H | Declaration under sub-section (1C) of section 197A of the Income-tax Act, 1961, to be made by an individual who is of the age of sixty years or more claiming certain receipts without deduction of tax |
| Form No. : 16 | Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source from income chargeable under the head “Salaries” |
| Form No. : 16A | Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source |
| Form No. : 26AS | Annual Tax Statement under section 203AA |
| Form No. : 35 | Appeal to the Commissioner of Income-tax (Appeals) |
| Form No. : 36 | Form of appeal to the Appellate Tribunal |
| Form No. : 49A | Application for allotment of Permanent Account Number under section 139A of the Income-tax Act, 1961 |
| Form No. : 49AA | Application for Allotment of Permanent Account Number [Individuals not being a Citizen of India/Entities incorporated outside India/ Unincorporated entities formed outside India] |
| Form No. : 49B | Form of application for allotment of Tax Deduction and Collection Account Number under section 203A of the Income-tax Act, 1961 |
| Form No. : 60 | Form of declaration to be filed by a person who does not have a permanent account number and who enters into any transaction specified in rule 114B |
