Middle class can breathe bit easy as tax rate halved


news24in7(IANS) In a major relief to the tax-burdened middle-class people, Finance Minister Arun Jaitley on Wednesday proposed to halve the income tax to five per cent for those earning between Rs 250,000 and Rs 500,000 per annum.

Presenting the 2017-18 Budget in the Lok Sabha, Jaitley said he proposes to halve the income tax for persons earning between Rs 2.5 lakh-Rs 5 lakh from the current 10 per cent.

“This will reduce the tax liability of all persons with incomes below Rs 500,000 either to zero (with rebate) or 50 per cent of their existing liability,” Jaitley said.

The existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs 2,500 that is available only to assessees up to an annual income of Rs 350,000.

According to him, the combined effect is that there will be nil tax liability for people with incomes of up to Rs 300,000 per annum.

The tax liability will only be Rs 2,500 for people with incomes between Rs 300,000 and Rs 350,000.

If the limit of Rs 150,000 under Section 80C for investment is used fully, the tax would be zero for people with incomes of Rs 450,000.

While the tax liability of people with incomes of up to Rs 500,000 is being reduced to half, all other categories of taxpayers in the subsequent slabs will also get a uniform benefit of Rs 12,500 per person.

“The total amount of tax foregone on account of this measure is Rs 15,500 crore,” Jaitley said.

In an effort to somewhat make good the loss of revenue, Jaitley proposes to levy a surcharge of 10 per cent of tax payable on individuals whose annual taxable income is between Rs 50 lakh and Rs 1 crore.

The surcharge will generate additional revenue of Rs 2,500 crore.

The existing surcharge of 15 per cent of the tax on people earning more than Rs 1 crore will continue.

For those with incomes of up to Rs 500,000 — other than business income — Jaitley said a single-page income tax return form will be introduced.

“It is a populist budget for the middle class. The budget proposes to give relief to the middle class while taxing the super-rich,” Neha Malhotra, Executive Director, Nangia & Co., an international tax advisory and accounting firm, told IANS.

“It was a legitimate expectation post-demonetisation that the personal income tax rate will be reduced to soften the tax hit on the pockets of the individuals,” she added.

According to Malhotra, immovable property owners have been relieved by lowering the holding period for availing lower rate of long-term capital gains tax from three years to two years.

“Also, the base year for computing capital indexation benefit has been changed from existing April 1, 1981, to April 1, 2001. This move will give significant relief to the taxpayers earning profits from sale of house property and will encourage investments in the real estate sector,” she said.

Another woe of the taxpayers is that provisions applicable on dishonoured cheque under Section 138 of the Negotiable Instrument Act are ineffective.

New effective way to tackle the issue of bounced cheque is a welcome move which shall relieve those facing hardship on these fronts, she added.

–IANS

Budget 2017: Personal Income Tax Rate Reduced To 5% For Those Earning Upto Rs 5 Lakh


Finance Minister Arun Jaitley in Union Budget 2017 slashed the existing rate of taxation for individuals with income between Rs 2.5 lakh to Rs 5 lakh to 5 percent from the existing 10 percent.

“While the government is trying to bring in its tax net more people who are not paying tax, the present burden is on the taxpayer and on the employees who are showing their income correctly,” Jaitley said.

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The finance minister added that there was a “legitimate expectation” post demonetisation that tax burden on honest individuals be lowered. Further, Jaitley emphasised that if the nominal tax rate is lower for the lowest slab, more people will prefer to come under the tax net.

CALCULATE YOUR NEW TAX LAIBILITY

Earlier, personal income tax was exempt for an annual income up to Rs 2.5 lakh but charged at 10 percent for income between Rs 2.5 lakh to Rs 5 lakh.
As this comes down to 5 percent, the tax burden of individuals in the income bracket is likely to become zero or halve as compared to previous years, Jaitley said.
Individuals with income between Rs 5 lakh and Rs 10 lakh will continue to be taxed at 20 percent and those above the Rs 10 lakh income bracket will be taxed at 30 percent, the finance minister added.

“If the exemption of Rs 1.5 lakh is used fully under Section 80C, the tax liability will be zero for income up to Rs 4.5 lakh,” Jaitley said. “All other categories of tax payers in subsequent brackets will also get a uniform benefit of Rs 12,500 per person.”
Jaitley said that the government will forego revenue to the tune of Rs 15,500 crore due to the tax incentive. To recover some of the revenue loss, he announced an additional surcharge of 10 percent for those whose annual taxable income is between Rs 50 lakh to 1 crore; Surcharge on income of Rs 1 crore or more remains unchanged.

In order to expand the tax net, the government also proposed a simple one-page form for individuals with an income up to Rs 5 lakh. Jaitley also said that anyone filing income tax return for the first time will not be subject to any income scrutiny in the first year unless there’s specific information with the taxman about high-value transactions.

“I appeal to all citizens to contribute to nation building by making a small contribution of 5 percent tax if their income is under Rs 5 lakh,” Jaitley said.

–Bloomberg Quint

Budget 2017: Cash No Longer Valid For Payments Above Rs 3 Lakh


Digital payments in India are set to get a big boost with Finance Minister Arun Jaitley, in his Budget 2017 speech, announcing that cash will be no longer allowed for transactions of more than Rs 3 lakh.

Budget 2017 year on cube with pencil and clockThe government also proposed a new payments regulator to be set up within the Reserve Bank of India. Jaitley said the government is also working to quickly roll out the recommendations put forward by a committee of chief ministers on digital transactions.
Arun Jaitley, Finance Minister In His Budget Speech To begin with, it is proposed to create a payment regulatory board in the Reserve Bank of India by replacing the existing board of regulations and supervision of payment systems. As we move faster to the path of digital and cheque payments, it is necessary to ensure that payees of dishonoured cheques are able to realise their payments. Therefore, the government is considering the option of amending the Negotiable Instruments Act suitably.

While the government brings about structural changes in payment regulation, it is also promoting digital transactions by proposing and potentially mandating petrol pumps, fertiliser depots, hospitals and colleges to have the option of accepting digital payments, including from the BHIM app.

Jaitley also announced two new schemes targeted at increasing the number of digital transactions through its flagship BHIM app — a referral bonus scheme for individuals and a cash-back scheme for merchants.

Budget 2017 set a target of 2,500 crore digital transactions in the upcoming financial year through various modes such as UPI, Aadhaar Pay and plastic cards.

While the government is yet to roll out Aadhaa- based payment systems — which come with their set of safety concerns — Jaitley said that 20 lakh Aadhaar enabled point-of-sale machines will be rolled out by September 2017.

According to Reserve Bank of India data, the value of debit card transactions at point of sale (PoS) terminals has grown by over 63 percent between 2012 and 2015. Credit card transactions at PoS terminals has grown 54 percent.

However, estimates suggest that 90% of transactions by value are still being carried out in cash in the country. This is set to change with the government’s latest push for digital payments post demonetisation.

In its attempt to boost use of cards, wallets and unified payments interface, the government has announced that banks will deploy 10 lakh additional PoS machines by March 2017 which will be complemented by the launch of Aadhaar Pay, which obviates the need of having a phone, debit card or passwords.

Bloomberg Quint