Finance Minister Arun Jaitley irked the opposition on Wednesday by implementing nearly 40 amendments in the Finance Bill including the Employees Provident Fund Act, Telecom Regulatory Authority of India Act, Companies Act, the Information Technology Act, Smuggling and Foreign Exchange Act, among the 40.
Jaitely has also pushed through a bill making Aadhar mandatory for getting a PAN card or filing income tax returns. The decision will make Aadhar mandatory from July 1.
Amid the protests and objection raised by the opposition for the decision, Jaitley said that, “by linking Aadhaar to income-tax returns, tax evasion and fraud will come down.”
The Finance Minister had earlier announced for a number of income tax changes in Budget 2017 in February. In addition for the Aadhar card mandating, a few other changes were also introduced in the bill. Here is a list of the changes:
– A 10 per cent surcharge will be applicable for individuals having income ranging from ₹50 lakh to ₹1 crore (existing surcharge of 15 per cent will remain the same for individuals having income above ₹ 1 crore.)
– A simple one-page form will be introduced for filing tax return for individuals having a taxable income up to ₹5 lakh other than business income.
– Individuals will be required to deduct a 5 per cent TDS (tax deducted at source) for rental payments above ₹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.
– The holding period of a property for qualifying as long-term gains will be reduced to two years, from three years. This will help save tax if a property is sold within two years of buying. 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.
– Income tax officials can reopen tax cases for up to 10 years if search operations reveal undisclosed income and assets of over₹50 lakh. Currently, tax officers can go back up to six years to scrutinise the books of accounts of assesses. Taxpayers who do not file their returns on time will have to shell out a penalty of up to₹10,000 from Assessment Year 2018-19. However, if the total income of the person does not exceed₹5 lakh, the fee payable under this section shall not exceed₹1,000.
– Partial withdrawals from National Pension System (NPS) will not attract tax. According to the proposed changes, NPS subscribers can withdraw 25 per cent of their contribution to the corpus for emergencies before retirement. Remember that withdrawal of 40 per cent of the corpus is tax-free on retirement.
– No deduction will be allowed for investment in Rajiv Gandhi Equity Saving Scheme from Assessment Year 2018-19. This tax-saving scheme, announced in the Union Budget for financial year 2012-13, was designed exclusively for the first-time individual investors in the securities market with gross total income below a certain limit.
– The tax rate on income between₹2.5 lakh and₹5 lakh will get halved to 5 per cent from 10 per cent. However, rebate under Section 87A gets reduced from₹5,000 to₹2,500. And no rebate will be applicable for taxpayers having income above₹3.5 lakh. This means tax savings of up to₹7,700 for those with a taxable income between₹3 lakh and₹5 lakh. And for persons with taxable income between₹5 lakh and₹50 lakh, tax savings of₹12,900.
– The government has cut down tax benefits borrowers enjoyed on properties let out on rent. As per current tax laws, 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₹2 lakh on interest repayment on home loan. But on rented properties, the borrower can only claim a deduction of up to₹2 lakh per year after adjusting for the rental income. And the amount above₹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.
The Finance bill, being a money bill doesn’t have to be passed in the Rajya Sabha, and thus was submitted in the Lok Sabha instead.
The Lok Sabha passed the Finance Bill 2017 even as some parties walked out and others protested. The new rules will be applicable from April 1, 2017.