Individuals Earning upto Rs. 3 lakh will attract nil tax– Budget 2017

Budget 2017, rationalized the rebate allowable under section 87A which will provide the tax benefit of over additional Rs. 50000.

In view of proposed rationalisation of tax rates( 5% instead of 10%) for individuals in the income slab of Rs. 2,50,000 to Rs.5,00,000,it is proposed to amend section 87A so as to reduce the maximum amount of rebate available under this section from existing Rs. 5000 to Rs. 2500.

It is also proposed to provide that this rebate shall be available to only resident individuals whose total income does not exceed Rs. 3,00,000.

This can be understand more clearly with help of following example :

In case of individual earning upto Rs. 3 lakh ,

taxable income becomes Rs. 50,000 (Tax rate 5% for tax slab of 2.5 to 5 lakh)

on which his gross liability of tax comes Rs. 2500 and

he will get rebate under section 87A of Rs. 2500.

Thus his net tax liability will come nil.

The existing provisions of section 87A provide for a rebate up to Rs. 5000 from the income-tax payable to a resident individual if this total income does not exceed Rs. 5,00,000.

This amendment will take effect from the previous year 2017-2018.

No TDS deducted on compensation received that are exempt under RFCTLAAR Act, 2013 (Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013) –Budget 2017.

Budget 2017, proposed to amend the section 194LA to provide that no deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 (except those made under section 46) of RFCTLARR Act.

Section 194LA, provides that any person paying compensation shall deduct tax at source at the rate of ten per cent. on the compensation or enhanced compensation or consideration on account of compulsory acquisition of any immovable property (other than agricultural land) under any law for the time being in force subject to certain conditions specified therein.

Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, ('RFCTLARR Act') came into force on 1st January, 2014.

Section 96 of the RFCTLARR Act, provides that income-tax shall not be levied on award or agreement made subject to limitations mentioned in section 46 of the said Act. Therefore, compensation received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFTCLARR Act), is exempted from the levy of income-tax.

The CBDT has issued Circular number 36/2016 dated 25th October, 2016 clarifying that compensation received in respect of any award or agreement which has been exempted from the levy of income-tax vide section 96 of the RFCTLARR Act shall not be taxable under the provisions of the Act, even if there is no specific provision of exemption for such compensation under the Act.

However, the circular addressed only the matter pertaining to taxability of compensation received on compulsory acquisition of and not tax deduction at source under section 194LA of the Act.

This amendment will applicable from 1^st April 2017.

Now the Form 15G/15H for non-deduction of TDS can be filled for insurance commission – Budget 2017.

Budget 2017, proposed to amend section 197A so as to make them eligible for filing self-declaration in Form.No.15G/15H for non-deduction of tax at source in respect insurance commission referred to in section 194D

Section 194 D of the act provides for tax deduction at source (TDS) at the rate of 5% for payments in the nature of insurance commission beyond threshold limit of Rs.50,000 per financial year.

Section 197A of the Act provides that tax shall not be deducted, if the recipient of certain payments on which tax is deductible furnishes to the payer a self- declaration in prescribed Form.No.15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil.

Presently, the payment in the nature of income referred to in section 194D is not covered by provisions of section 197A.

This will be applicable from 1^st June 2017.

Capital Gain Exemption under section 54EC (Investment in certain Bonds) - Budget 2017

Budget proposed investment in any bond redeemable (Notified by central government) after three year shall also eligible for deduction section 54EC.

Earlier, only the investments in bond issued by the National Highways Authority of India or by the Rural Electrification Corporation Limited are eligible for exemption under this section.

Section 54EC provides that capital gain to the extent of Rs. 50 lakhs arising from the transfer of a long term capital asset shall be exempt if the assesse invests the whole or any part of capital gains in certain specified bonds, within specified time.

It is proposed to amend section 54EC so as to provide that investment in any bond redeemable after three years which has been notified by the Central Government in this behalf shall also be eligible for exemption.

The amendment will be applicable for previous year 2017-18 and subsequent years.

Capital Gain – Joint Development agreement –Budget 2017.

Currently in case of joint development agreement between the owner of immovable property and the developer, the capital gain tax liability arises in the hand of owner in the year in which the possession of immovable property is handed over to the developer for development of project.

Under the existing provision, capital gain is chargeable to tax in the year in which transfer takes place expect in certain cases.

“Transfer”: includes any arrangement or transaction where any rights are handed over in execution of part performance of contract, even though the legal title has not been transferred.

Thus with a view to minimise the hardship which the owner of land may face in paying capital gain tax in the year of transfer, Budget 2017 propose to insert new sub section 5A under section 45.

Ø It provides that in case of assesse being individual or Hindu undivided family, who enters into a specified agreement for development of a project, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority.

Ø It is further proposed to provide that the stamp duty value of his share, being land or building or both, in the project on the date of issuing of said certificate of completion as increased by any monetary consideration received, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.

Ø It is also proposed to provide that benefit of this proposed regime shall not apply to an assesse who transfers his share in the project to any other person on or before the date of issue of said certificate of completion. It is also proposed to provide that in such a situation, the capital gains as determined under general provisions of the Act shall be deemed to be the income of the previous year in which such transfer took place and shall be computed as per provisions of the Act without taking into account this proposed provisions.

Ø It is also proposed to define the following expressions "competent authority", "specified agreement" and "stamp duty value" for this purpose.

Ø It is also proposed to make consequential amendment in section 49 so as to provide that the cost of acquisition of the share in the project being land or building or both, in the hands of the land owner shall be the amount which is deemed as full value of consideration under the said proposed provision.

Explanation:

(i)                “competent authority” means the authority empowered to approve the building plan by or under any law for the time being in force

(ii)             “specified agreement” means a registered agreement in which a person owning land or

building or both, agrees to allow another person to develop a real estate project on such land or building or both, in consideration of a share, being land or building or both in such project, whether with or without payment of part of the consideration in cash;

(iii)           “Stamp duty value” means the value adopted or assessed or assessable by any authority of Government for the purpose of payment of stamp duty in respect of an immovable property being land or building or both.’

The above amendment will applicable from previous year 2017-18 and subsequent years.

Long term capital gain – period of holding reduced from 36 months to 24 months.

Period of holding in case of land or building or both is reduced from 36 months to 24 months, to qualify as long term capital asset.

It is good for individuals for tax saving purpose as taxation under long term capital gain calculated at 20% after indexation as against short term capital where tax treatment is done on marginal income tax rate.

Budget 2017 amend section 2(42A) of the Act so as to reduce the period of holding from the existing 36 months (3 years) to 24 months (2 years) in case of immovable property, being land or building or both, to qualify as long term capital asset.

This amendment will be effective for all transaction occurred on or after 1^st April 2017.

Deduction under section 80CCG (Investment in Rajiv Ghandi Equity saving scheme) to be discontinued From A.Y 2018-19 – Budget 2017

Under the existing provisions of section 80CCG, deduction for three consecutive assessment years is allowed upto Rs. 25,000 to a resident individual for investment made in listed equity shares or listed units of an equity oriented fund subject to fulfilment of certain conditions. This deduction was introduced vide Finance Act, 2012.

However considering the fact that limited number of individuals availed this deduction and also to rationalize the multiplicity of deductions available under Chapter VI-A of the Act, it is proposed to phase out this deduction by providing that no deduction under section 80CCG shall be allowed from assessment year 2018-19.

However, an assessee who has claimed deduction under this section for assessment year 2017-18 and earlier assessment years shall be allowed deduction under this section till the assessment year 2019-20 if he is otherwise eligible to claim the deduction as per the provisions of this section.

This amendment will apply from 1^st April 2017 and apply in relation to previous year 2017-18.

New exemption to Chief Minister and LG relief funds –Budget 2017

Budget 2017 proposed a new exemption under section 10(23C) to Chief Minister and LG relief funds.

Presently under section 10 (23C), exemption is provided in respect of income of certain funds which include the Prime Minister’s National Relief Fund.

The Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund (Section 80G (a)(iiihf)), which is of same nature at the level of state or the Union Territory as is Prime Minister’s National relief fund at the national level, is not exempted under the said clause.

In the absence of such exemption, these funds are required to obtain registration under section 12A of the Act in order to avail exemption of its income under section 11 and 12 of the said Act and are required to fulfil certain conditions.

Therefore, Budget 2017 proposed to amend said clause so as to provide the benefit of exemption to the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund also.

This amendment will take effect retrospectively from the 1st April, 1998, the date on which sub-clause (iihf) of clause (a) of sub-section (2) of section 80G relating to deduction in any sum paid to the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund came into force, and will, accordingly, apply in relation to assessment year 1998-99 and subsequent years.

New benefits to National Pension system subscribers - Budget 2017

Ø National Pension System (NPS) – partial withdrawal (upto 25%) is now fully exempted from tax.

Current Provision	Proposed Provision –Budget 2017
Payment from National Pension System (NPS) trust to an employee on closer of his account or opting out shall be exempt up to 40% of total amount payable to him.	partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under will exempt from Tax.

This benefit will be available on partial withdrawal made by NPS subscriber after 1 April 2017.

Ø Now the Non –salary /self-employed individual will get deduction of contribution made in NPS upto 20% of salary as against 10% earlier.

Current Provision

Proposed Provision –Budget 2017

Non- Salary Individual/ Self employed Deduction under section 80CCD(1) of contribution made in NPS is allowed up to 10% of salary. Salary Individual/Employee Deduction under section 80CCD(1) of contribution made by employee in NPS is allowed up to 10% of Salary. Deduction under section 80CCD(2) of contribution made by employer of behalf of employee in NPS is allowed up to 10% of salary. Thus in case of employee, the deduction allowed under section 80CCD add up to 20% of salary.

Non- Salary Individual/ Self employed Deduction under section 80CCD(1) of contribution made in NPS is allowed up to 20% of salary. Salary Individual/Employee Provisions in case of salary Individual remain the same.

Deduction with higher percentage of 20% will be available on contribution made by Non –employee individual in NPS after 1^st April 2017.

Personal Income Tax - Budget 2017

Rates of income-tax in respect of income liable to tax for the assessment year 2017-18.

Rate of Income Tax in the case of every individual

Total Income	Rate of Tax
Upto Rs. 2,50,000	Nil
Rs. 2,50,001 to Rs. 5,00,000	5%
Rs. 5,00,001 to Rs. 10,00,000	20%
Above Rs. 10,00,000	30%

Rate In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year.

Total Income	Rate of Tax
Upto Rs. 3,00,000	Nil
Rs. 3,00,001 to Rs. 5,00,000	5%
Rs. 5,00,001 to Rs. 10,00,000	20%
Above Rs. 10,00,000	30%

Rate in the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year.

Total Income	Rate of Tax
Up to Rs. 5,00,000	5%
Rs. 5,00,001 to Rs. 10,00,000	20%
Above Rs. 10,00,000	30%

Rate of surcharge

        i.            10% of income tax in case a total income exceeding fifty lakh rupees but not exceeding one crore rupees, and

      ii.            15% of income tax in case a total income exceeding one crore rupees.

TDS on rent payment exceeding Rs.50,000 - Budget 2017

Budget 2017 proposed to imposed TDS deduction liability on individual or a HUF (other than those liable for tax audit) for paying to a resident any income by way of rent exceeding fifty thousand rupees for a month or part of month during the previous year , shall deduct an amount equal to five per cent. of such income as income-tax thereon.

New Section 194-IB inserted

Ø  Applicable: - Individual or an HUF for rent payment exceeding Rs. 50,000 for a month or a part of month during the previous year.

Ø  Rate of TDS :- 5%

Ø  Deduction of tax :- at the time of credit of rent, for the last month of the previous year or the last month of tenancy if the property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

Ø  It is further proposed that the deductor shall not be required to obtain tax deduction account number (TAN) as per section 203A of the Act.

Ø  It is also proposed that the deductor shall be liable to deduct tax only once in a previous year.

Ø  It is also proposed to provide that where the tax is required to be deducted as per the provisions of section 206AA(where PAN number of the deductee not furnished i.e at a rate of 20%), such deduction shall not exceed the amount of rent payable for the last month of the previous year or the last month of the tenancy, as the case may be.

     Salaried employee who are claiming HRA and showing payment of rent of more than Rs. 50,000/-  per month have to compulsory deduct TDS of 5%.

The amendment will be effective from 1^st June 2017.