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Budget 2017: How it impact your tax liability

Point 1 – Is there any tax impact on my income of Rs.55 Lakhs per year?

Yes! Till FY 2016-17, on your income, the approximate tax works out to Rs.14 lakhs. After this budget (means from 1st April 2017), the tax payable will go up by Rs.1.40 Lakhs (10% on the tax payable as surcharge, if the taxable income is above Rs.50 Lakhs)

Impact – Big tax outflow.

Point 2 – My salary is Rs.25 Lakhs and I have invested Rs.1.50 lakhs in PF. What is the tax implication after the budget?

The initial tax slab rate is reduced from 10% to 5%; thereby, you will save a tax of  Rs.12500 per year. (from FY 2017-18 onwards)

Impact – Nominal (token) tax savings.

Point 3 – I have let out a property on a monthly rent of Rs.10000. I have taken a housing loan on this property, for which I pay Rs.3,80,000 as interest per year. Currently, I claim the entire interest paid as deduction. After this budget, can I continue to claim the entire interest?

No. The budget proposes to restrict the loss on house property that can be deducted from ‘other heads of income’ such as ‘salary income’ to Rs 2 lakh only. So, in this case, you can claim Rs.2 lakhs and the balance of Rs.96000 can be carried forward to 8 subsequent years and setoff only against house property inocme.

Impact –Increase in tax outflow

Point 4 – I know the due date of filing income tax return for FY 2015-16 was 31st July 2016. But if I file now, is there any additional fee for delayed filing? Will the position change after the budget?

Currently, there is no additional fee for delayed filing. However, from next year, delayed filing attracts a fee u/s 234F

In a case where the return is not filed within the due dates specified for filing of return under sub-section (1) of section 139.

The proposed fee structure is as follows:—

  • a fee of Rs.5000 shall be payable if the return is furnished after the due date but on or before the 31st day of December of the assessment year;
  • a fee of Rs.10000 shall be payable in any other case.

However, in a case where the total income does not exceed five lakh rupees, it is proposed that the fee amount shall not exceed Rs.1000

Point 5 – We are a small company, having a turnover of Rs.12 Crores. Currently, we make a profit of Rs.60 lakhs and on which pay an income tax of Rs.18 Lakhs (30% rate). How much will we have to pay after this budget?

You have some good news! You will have to pay a tax of Rs.15 lakhs (25% rate) from the coming year. This reduced tax benefit rate is made available to MSME companies with annual turnover up to Rs.50 Crores.

So, if I also run a partnership firm which has a turnover of 5 Crores, will I get the reduced tax benefit?

Unfortunately No! The reduced tax benefit is applicable to companies only.

Point 6 – Paying rent over Rs.50000 a month? You have to deduct tax (TDS u/s 194IB) at 5%

Individuals and HUFs paying rent of Rs 50,000 or more per month will now have to deduct 5% tax at source i.e TDS at the rate of 5%, as per Budget 2017 proposals.

This move is aimed at ensuring that recipients of large rental incomes come into the tax net as they would be forced to report the full rental income in their tax returns in order to claim benefit of the TDS amount.

This change is proposed to be made effective from 1.6.2017.

 

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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm.For further information or query, please email it to team@simplifiedlaws.com