Finance Minister Arun Jaitley laid out on 01^st February, 2017 a notional budget that aimed to boost spending, as he sought to lift growth and assuage people’s pain from the government’s drive to purge the economy of “black money”. “The finance minister has presented an ‘uttam’ budget, devoted to strengthening the hands of the poor” – said Prime Minister Narendra Modi. FM unveiled sweeping measures that ranged from boosting farm growth to easing the burden on the salaried middle-class taxpayers thereby providing ease to individual taxpayers in Budget 2017.

Demonetization led to 35% increase in personal income tax which made the FM to bring reform in the Income Tax Slab rates – affecting directly the salaried – middle class people of nation. Apart from the measures, which directly benefit the individual taxpayers, Budget 2017 had also revealed some major reforms which benefit the individual taxpayers at a major scale thereby affecting their taxes indirectly.  Below are listed the reforms introduced by Budget 2017:

 

1 .Taxation on Housing for Builders:

 

Finance Minister gave relief to Builders and Promoters for whom the constructed properties are Stock-in-Trade by proposing to apply the Rule of taxing the un-occupied houses at a notional rental income, post receiving the completion certificate, after one year at the end of the year when the completion certificate is received.

FM Arun Jaitley said – ”For Builders for whom constructed buildings are sock-in trade, I propose to apply this Rule only after 1 year at the end of the year when the completion certificate is received so that they can get some breathing time in liquidating their inventory”.

 

2. Tax Relief on Capital Gains on Real States:

 

The holding period for capital gains on sale of immovable property (Land & Building)—land and building—to qualify as long term capital gains (LTCG) is proposed to be reduced to 2 years from 3 years in the Union Budget, 2017. At present, capital gains on land and building qualify as long term capital gain if holding period is minimum 3 years. 

The base year for capital gains calculation for all class of assets including immoveable properties with Cost Inflation Indexation benefit is also proposed to be shifted from 1981 to 2001. These steps are expected to reduce the capital gains tax burden on property sellers and thereby make movement of immovable capital easier.

 

3. Presumptive Taxation Reforms:

 

While promoting digital economy, FM said “At present 8% of their Turnover is counted as presumptive income. I propose to make this as 6% in respect to the Turnover received by non-cash means. The benefits shall also applicable for the transaction undertaken for the current year also.”

It clearly relieves the small and middle class businessmen, opting in the presumptive taxation scheme, by lowering their tax burden by 2%.

FM also in its speech stated that the professionals opting for presumptive taxation scheme u/s 44ADA, shall have the benefit of paying the advance taxes in one installment in March instead of four, as applicable to other assessee’s.

 

4. Maintenance of Books of Accounts of Individuals / HUF:

 

The threshold for maintenance of books of accounts of individuals / HUF is increased from a turnover of Rs.10 Lakhs to Rs.25 Lakhs or income from Rs.1.25 Lakhs to Rs.2.5 Lakhs.  This provides for ease of doing the business by the small taxpayers as they are required to comply the provisions of the maintenance of Books of Accounts at a Turnover of Rs.25 Lakhs or income of Rs. 2.5 Lakhs.

 

5. Relaxation to Individual Insurance Agents:

 

Presently a TDS of 5% is deducted from the commission payable to individual insurance agents even if their total income from all the heads altogether is below the threshold of taxable income. Budget, 2017 proposed to exempt such deduction of TDS subject to the filing of a Self – Declaration that their income is below taxable limit.

 

6. Reforms for Revised ITR:

 

“In order to allow people to claim refund expeditiously, the time period of revising a tax return is being reduced to 12 months from the completion of Financial Year at par with the time period of filing the return” – said by Arun Jaitley.

At present, the time period for revising an ITR is one year from the completion of Assessment year of the Financial Year in which the return is filed by the assessee. But, as proposed by FM, the said threshold is reduced to one year (12 months) from the completion of the Financial Year at par with the time period of filing the return.

 

7. Simplifying the process of Scrutiny Assessments:

 

Tax authorities in India have the power of initiating scrutiny assessment under section 143 (3) of the Income Tax Act 1961, if they have a reason to believe that the individual has filed incorrect particulars or suppressed his income in his return of income. Budget 2017 proposed for compression in time limit for completion of scrutiny for the year 2018-19, from 21 months to 18 months, and for the year 2019-20 onwards to 12 months. 

 

8. Benefits extended to Taxpayers filing ITR for First Time:

 

Taxpayers filing the ITR for 1^st time would not be subject to scrutiny assessment by the Assessing Officers for the 1^st year of their return unless there is some information available with the Department with regard to any high value transaction.

 

FM has rolled out the Budget 2017 keeping in mind the need to continue with economic reforms, promote higher investments and accelerate growth for nation. “I appeal to all citizens of India to contribute to National Building by making a small payment of 5% of tax if there income falls under the lowest slab of Rs.2,50,000 to 5,00,000” – said by Finance Minister in his concluding speech after he proposed the change of tax rate from 10% to 5% in the lower part of IT slab of  falling in between Rs.2,50,000 to 5,00,000. With the proposed Budget, 2017, salaried individuals are to be benefited at large thereby lowering the tax burden and providing their advantages to them.

 

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