Published Editorial

Budget 2017 - Budget Intended To Improve Compliance, System-Based Administration

February 2017

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Sreenivasulu Reddy

With the agenda of "transform, energise and clean India", the finance minister in the Union Budget for financial year 2017-18 laid a roadmap to the future with a vision to bring transformative changes in the country.

Considering the thrust of stimulating growth, curbing black money and simplification of tax administration, the finance minister laid down the proposals from a tax perspective of today. Let us look at some of the key personal tax changes that are proposed by him for individual taxpayers:

Relief to small taxpayers

It is proposed to reduce the existing rate of taxation for individual assessee between income of Rs. 2.5 lakh to Rs. 5 lakh to 5 per cent from the present rate of 10 per cent.

The rebate under Section 87A of the Income Tax Act has been proposed to be reduced from Rs. 5,000 to Rs. 2,500 for resident individuals with income not exceeding Rs. 3.5 lakh per annum.

Measures to boost National Pension Scheme (NPS)

Currently, the payment made from NPS Trust to an employee on closer of his account or opting out is exempt up to 40 per cent of total amount payable to him or her.

It is now proposed to provide exemption to partial withdrawal not exceeding 25 per cent of the contribution made by an employee in accordance with other prescribed conditions.

Also, it is proposed to amend the provisions of Section 80CCD of the Income Tax Act so as to increase the upper limit of 10 per cent of gross total income to 20 per cent in case of self-employed individual.

Measures for promoting investment in immovable property

It is proposed to reduce the holding period from 36 months to 24 months in case of immovable property, being land or building or both, to qualify as long-term capital asset.

Further, in order to revise the base year for computation of capital gains, it is proposed that the cost of acquisition of an asset acquired before April 1, 2001 will be allowed to be taken as fair market value as on April 1, 2001 and the cost of improvement shall include only those capital expenses which are incurred after April 01, 2001.

Restricting cash donations

It is proposed that deduction for any donation shall not be allowed for any sum exceeding Rs. 2,000 unless such sum is paid by any mode other than cash when compared to current limit of Rs. 10,000.

Restriction on set-off of loss from house property

It is proposed that the set-off of loss under the head "Income from house property" against any other head of income shall be restricted to Rs. 2 lakh for any assessment year.

However, the unabsorbed loss will be allowed to be carried forward for set-off in subsequent years.

Fee for delay in filing of return

In order to ensure that return is filed within due date, it is proposed that a fee for delay in furnishing of return will be levied as mentioned below:

  • Rs. 5,000, if the return is furnished after the due date but on or before December 31 of the Assessment Year (AY)
  • Rs. 10,000 in any other case
  • Rs. 1,000, the total income does not exceed five lakh rupees

Rationalisation of time limit for assessment/re-assessment

It is proposed that for Assessment Year 2018-19, the time limit for making an assessment order will be reduced from 21 months to 18 months from the end of the Assessment Year.

Further, for the AY 2019-20 and onwards, the said time limit will be 12 months from the end of the Assessment Year.

As amendments pronounced in the Budget by the finance minister are intended to improve compliance and system-based administration, one should always keep a tab on the latest tax reforms/requirements to ensure compliance and decision-making.

(The author is Director-People Advisory Services at EY)