Changes proposed in the Budget which would impact the individual taxpayers are as under:
1. Change in Tax rates:
While the FM provided some relief to the taxpayers by reducing the tax rates to 5% from the existing 10% in the tax bracket Rs. 2.5 lacs to Rs. 5 lacs, the introduction of a 10% surcharge for individuals and Hindu undivided families (“HUFs”) taxpayers having taxable income over Rs. 50 lacs and upto Rs. 1 crore would increase the tax payouts for the aforementioned assessees.
2. Introduction of TDS on rent payments made by Individuals and HUFs:
Currently, rent payments by individuals and HUFs not subject to tax audit under section 44AB are outside the ambit of TDS. The FM has tried to widen the tax base by inserting a new section 194(IB) which provides that individuals and HUFs paying rent in excess of Rs. 50,000 per month or part thereof need to withhold TDS on such payments at the time of payment of rent or credit to the payee’s account, whichever is earlier. It may be noted that such TDS deduction would not require a tax deduction account number and the compliance can be made only once in a previous year thus reducing the compliance burden.
3. Restriction on loss from house property
A new section 71(3A) has been introduced proposing to restrict the set-off of loss from house property to a maximum of Rs. 2 lacs in any assessment year. Thus, home buyers who had taken a loan and let out their property can no longer claim the entire interest as a deduction against the property income. Hence taxpayers who had invested in second homes and had let it out or were offering it as a deemed let-out property for offsetting the loss on account of interest on home loan against salary income will be adversely impacted by these provisions.
4. Land and building held for more than 24 months to qualify as “long term” capital asset
To provide an impetus to the real-estate sector, the holding period for investments in land or building or both has been proposed to be reduced from more than 36 months to more than 24 months thereby making the sector more attractive for investment.
5. Reduction of time limits for filing a revised return, and rationalization of time limits for assessment proceedings
To enable faster assessments, the time limit for filing a revised return has been sought to be reduced till 31 March of the assessment year or before completion of assessment, whichever is earlier. Hence, individuals who need to revise their tax returns for the AY 2018-19, need to be mindful of this fact and ensure that the aforesaid deadline is met.
The time limit for completion of assessments has also been sought to be reduced from 21 months from the end of the assessment year to 18 months for the assessment year 2018-19 and the said time limit shall be further reduced to 12 months for the assessment year 2019-20. Thus, it is proposed to expedite the assessments by utilizing the overall efficiency due to use of technology and massive computerization.
6. Fee for filing delayed return
A new section 234F has been introduced which provides that a fee shall be levied for delay in filing the tax return beyond the due date. The fees payable shall be Rs. 5,000 where the return is filed post the due date but on or before 31 December and Rs. 10,000 in other cases. However, the fee payable shall be capped at Rs. 1,000 where the total income does not exceed Rs. 5 lacs. Consequently, the provisions of section 271F, which provides for a penalty of Rs. 5,000, will not be applicable from assessment year 2018-19.
7. Foreign tax credit in respect of disputed cases
Currently the tax provisions provide for rectification of assessment orders only in case of certain specified orders. In cases, where there is a dispute of taxes paid overseas and the same has subsequently been resolved, tax authorities can rectify the relevant assessment order/intimation provided the assessee furnishes within the prescribed time the relevant proof viz. payment of taxes overseas, settlement of dispute, and an undertaking that such foreign tax credit has not and will not be claimed in any other assessment year. This is a welcome move and will provide relief to tax payers where they were earlier not able to claim the benefit due to the absence of an enabling provision.
8. Limitation on cash transactions
To curb the black economy, a new provision section 269ST has been introduced which seeks to levy a penalty in respect of any specified transaction. Specified transaction means
||any person receiving Rs. 3 lacs or more in aggregate from a person in a day
||in respect of a single transaction, or
||in respect of transactions relating to one event from a person,
otherwise than by way of an account payee cheque or bank draft or through the use of electronic clearing system through a bank account. The penalty amount shall be the amount of such receipt to be paid by the recipient. Consequentially, provisions pertaining to tax collection at source at 1% on cash sale of jewellery exceeding Rs. 5 lacs is proposed to be withdrawn.
From the above proposed amendment, it can be seen that the Government is keen in its resolve to fight against the black money and ensure tighter compliance of the tax laws.