One set of taxpayers, albeit a small one, would be a tad unhappy with Finance Minister’s Union Budget 2016-17. With the Budget introducing a surcharge of 10 per cent for people with incomes of over Rs 50 lakh to one crore, there would be a rise of around 3 per cent in the income tax payout. The new calculation for income-tax rate for this slab will be: 30 per cent tax + 10 per cent surcharge on tax + 3 per cent cess on both tax and surcharge) or in total, 33.99 per cent. However, the vast majority of taxpayers with taxable incomes of Rs 2.5 lakh to Rs 5 lakh should be a happy lot as their tax burden is down by half.
Prior to this Budget, the government levied a surcharge (of 15 per cent) on those with an income above Rs 1 crore. This, say experts, is a sop from the government to compensate for the hardships of demonetisation. This reduction in tax rate will benefit people in all tax slabs. “For those in the income bracket less than Rs 5 lakh, the tax burden will be zero or it will half. For everyone in the above Rs 5 lakh income bracket, the tax bill will be reduced by minimum Rs 12,500,” says Archit Gupta, founder and chief executive officer, ClearTax.com.
One reason for reducing the tax rate applicable to the lowest income slab, says Gupta, could be to persuade more people to either file their returns for the first time or declare their income honestly. Another key announcement was that returns of those having income less than Rs 5 lakh will not be scrutinised unless the tax authorities Budget News 2017 have specific information against the assessee. Experts view this too as an inducement to get more people to file tax returns.
New tax slabs, Tax slabs, budget 2017 Sonu Iyer, tax partner and people advisory services leader, EY India informs that people having income up to Rs 3 lakh will not have to pay any tax at all. The standard deduction stands at Rs 2.5 lakh. On the next Rs 50,000, a tax rate of 5 per cent would have amounted to a tax bill of Rs 2,500. But the rebate of Rs 2,500 under Section 87A means that people with income up to this level don’t have any tax burden.
In the future, enforcement is likely to become stricter. “Some of the data cited by the Finance Minister–76 lakh tax payers in the country of which 56 lakh belong to the salaried class–was astonishing. The government will use data analytics to get more people to file IT returns and disclose their income honestly,” says Kuldip Kumar, partner and leader, personal tax, PwC India.
Henceforth, cash transactions of above Rs 3 lakh will not be permitted. This was a recommendation of the Special Investigation Team (SIT) which the government has accepted.