Finance Minister (FM) Arun Jaitely has given a remedy to the middle-class Indians this fiscal year by reducing the base tax rate to 5% which was 10% earlier for the income group between Rs. 2.5 lakhs to Rs. 5 Lakhs. The new tax slab suggests that there will be no tax liability for income up to Rs. 3 lakhs. For assesses having income between 3 lakhs to 5 lakhs, shall be liable to pay a tax of 5%.
To make up for a loss a loss of Rs. 15,000 crore caused due to reduction is tax slab, an additional surcharge of 10% is imposed for the tax payers with an annual income between Rs. 50 lakhs to Rs. 1 crore. In case if the income for a financial year is 1 crore or above, you shall be liable to pay 15% surcharge which is an old levy with no change so far. With the aim of boosting compliance among small tax payers, the FM has introduced massive reforms in taxation rules for small and medium enterprises. Following are the key areas which received benefits from reduction of income tax rate under Union Budget 2017.
Reduction in taxable income slabs: The benefit of 5% reduction in taxable income is extended to resident and non-resident Indians who are below 80 years of age.
Scope of Long term bond extended under Section 54EC: Investments in RECL bonds and NHAI bonds were exempted on investment up to Rs. 50 Lakhs. Under new budget, in addition to this exemption under Section 54EC shall be provided on the investment of long term capital gains in any bond redeemable after 3 years.
Shifting of base year for capital gain computation: The Fair Market Valuation (FMV) for capital assets shall be accessed by keeping base year April 1, 2001 instead of April 1, 1981. Accordingly, assesses have an option to consider FMV or cost as on April 1, 2001 for the assets acquired on or before April 1, 2001.
Post demonetization, tax rates were expected to get softer to provide a sigh of relief to Indian and this budget has live up to such expectation to an extent.