Budget 2017: Income Tax takeaways for the middle class
Proposals on personal income tax, did not match the expectation build-up since demonetisation
While the Union Budget for the year 2017-18 did not turn out to be the big-bang one that many were expecting post demonetisation, Finance Minister Arun Jaitley did announce some relief measures for the middle class.
Proposals on personal income tax, the most awaited part of the Budget speech, did not match the expectation build-up since demonetisation. The much-discussed basic exemption of Rs 5 lakh did not materialise. However, those in the 10% income tax bracket (incomes between Rs 2.5 lakh-5 lakh) were the beneficiaries of the FM’s proposals. Their tax liability now stands halved from 10% to 5%. On the other hand, the rebate on tax payable of Rs 5,000 now stands reduced to Rs 2,500 in view of the cut in tax rate for this category. Tax-payers in other slabs too will see savings of up to Rs 12,500.
“Some changes are positive. Halving of tax rates for those earning up to Rs 5 lakh will help widen the tax base. The Budget has also introduced a provision where the first-time income tax returns filer may not face any scrutiny. This will also help widen the tax base,” says Amarpal Chadha, tax partner, People Advisory Services, EY.
However, at the other end of the income band, those with a taxable income of over Rs 50 lakh will now have to shell out a surcharge of 10%. “So, if you fall in this bracket and your taxable income is say Rs 75 lakh, your tax liability could straightaway go up by Rs 2 lakh,” adds Chadha. High net worth individuals with taxable income of over Rs 1 crore will continue to pay the existing surcharge.
“The government is serious about cracking down on tax evasion. My advice to taxpayers is to acknowledge this fact. Going forward, every individual – salaried and others – will have to file their tax returns and pay taxes diligently,” says Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP.
He believes that overall, the Budget is a positive for the small tax-payers drawing a taxable income of up to Rs 5 lakh. “This group of people must have suffered greater trouble standing in queues during demonetisation. However, such relief could also have been extended to people in higher tax brackets as well,” he adds.
In addition, the small tax-payers will also have it easier when they file their returns next financial year. They will only have to fill up a “simple” one-page form to file their returns.