New Income Tax Laws in India
You must be aware of the latest changes in income tax regulations from` FY 2017-18 as this can affect your financial planning in future. The finance bill that was passed recently has brought a lot of changes to the income tax laws and having a proper understanding about the updated laws can help you to make suitable arrangements for your tax filing activities. In this regard, let us discuss the top 10 most important laws that can affect many people across the country. Remember that, you need not panic about any of these changes and the simple thing you need to do is to consult your financial advisor before taking any important decision concerning your investment. This can help you to avoid any mistakes and you can be well prepared to handle the situation in future.
1. Tax rate is lowered for the general public
The government has lowered the rate of tax from 10% to 5% and this move is likely to positively affect salaried people. If you are earning your income from salary in the range of 2.5 lakh rupees to 5 lakh rupees, you will be eligible for this rate cut in income tax. On the other hand, for people who do not come under this category, standard tax benefit of 12500 rupees is provided by the government. In this way, they have tried to bring in lot of excitement into the market as everyone will get some benefit by the new rate of tax.
2. Changed rates for Surcharge
The new laws have brought in some changes with regards to the surcharge rates. This move is likely to affect the high end taxpayers and they will have to pay a surcharge of 10% If they have income in the range of 50 lakh rupees to 1 crore rupees. In the same manner people having income more than 1 crore rupees will have to pay a surcharge @ 15%. This is the additional tax that is usually levied on top of income tax for the individuals as well as the companies. However, the surcharge for people earning less than 50 lakh rupees per annum is Nil and this provides some relief for people having earnings in this category.
3. Changes in tax benefits for home loan
The tax benefits for people taking home loan has been reduced and this is not favorable news for borrowers in the market. It was earlier possible to claim complete tax deduction on the interest amount paid for the home loan. This situation had increased the confidence of buyers in the market and the sector was optimistic about growth in the near future. However, the new rates will allow tax deduction only till the amount of 200000 rupees and the additional amount that has been paid for the interest can be carried forward for the next 8 assessment years. This can be later adjusted against rental income.
4. Furnishing other details is compulsory for filing tax and application for PAN
As per the new amendments made to the income tax laws by the government, it is mandatory for people to provide the details of their Aadhaar Card whenever they want to file taxes in future. In the same way, it is also mandatory to provide the same details when people have to apply for PAN card. If you already have PAN card, it becomes necessary to link it with the Aadhaar card to deal with financial transactions in future.
5. One page tax return form
According to the new laws, it is very easy to file income tax returns and you can only submit a single page ITR form to the authorities if you do not have more than 50 lakh rupees income in a particular year. The same clause applies to people having rental income from a single property. This move is welcomed by many people as they need not have to worry about filling complicated application forms whenever they have to file tax returns. Similar move is expected to come with various other application forms for tax filing and the government is taking positive steps towards simplifying the entire process. This means that the common man will not have too much confusion with regards to filing tax returns and they can complete the transactions even without professional guidance in future.
6. Two lakh limit for cash transaction
If you are dealing with cash transactions, you need to be very careful in future as the limit has been reduced from the earlier 300000 rupees to 200000 rupees. Remember that this limit is not applicable on a per day basis and it applies for the entire transaction. In this manner, you should be very careful when dealing with cash transfers and avoid them as much as possible in future. There is a huge penalty for any violation and people have to pay 100% of the cash amount that is used for the said transaction. You can choose alternative methods and pay by cheque or online transfer whenever you want to make any payment for any products or services received from other people and companies.
7. Rs 2000 limit for cash donations
According to the new regulations, you will not be able to get any tax exemption if you are making donations of more than 2000 rupees. This move is seen as an attempt by the government to curb the misuse of income tax laws with regards to cash donations. Many non-government organizations were accepting cash donations in huge amounts from unreliable sources. However, the tax benefits made by cheque or any other digital methods will continue to enjoy the same benefits as earlier without any problems. If you want to donate money for some Charity or other organization, make sure that you transfer the funds online or pay them by cheque to get tax benefits in future. Make sure that you keep a track of all the donations made through cash so that you can easily declare them while filing your returns.
8. Lower tax rates for small businesses
The tax rates for small and medium range companies having a turnover of less than 50 crores per year has been reduced from the earlier 30% to 25%. This move will bring positive changes to the business environment and many small companies will get to benefit from the latest updates with income tax laws. There are many small companies that fall in this category and they will benefit with the new regulations made in this sector. Even though the change is very small, it can bring a lot of relief for small companies as they will get to pay lower rates of tax and save money for their business growth in future.
9. TDS deduction of 5% for higher value rent
If you are paying rent in excess of 50000 rupees, you will have to deduct TDS @ 5% and submit it to the tax authorities. This move is an effort to curb the menace of fake rent receipts in the high rental category. According to experts, people will now not be able to cheat the authorities with false rent receipts as they will have to declare such rental earnings to the Income Tax Department. However, you need not worry about these changes if you are not paying high rent for your building.
10. Reopening of old cases up to 10 years
From now onwards, the tax authorities will have complete rights to reopen earlier tax files up to the duration of 10 years if they notice any discrepancies in the assets and income of more than 50 lakh rupees. Earlier, the limit for such cases was restricted to 6 years. This update is likely to affect individuals having fictitious transactions in the past. In this scenario, they will have to pay heavy penalty for not showing the actual income and hiding the assets in the past.
Apart from the above mentioned rules, the government has brought in many other changes that can have a huge impact on the financial market. There are significant changes made to the transactions in stock market and you have to be very careful when you deal with them in future. All you need to do is to understand the renewed laws so that you can easily follow them whenever it is required for your transactions in the financial market.
In the similar manner, there are some changes made to the property laws and it is a good idea to stay updated with such changes if you are dealing with property transactions. If you have any queries with regards to the latest changes made to the income tax laws, you can get in touch with your financial advisor and get professional guidance with regards to your financial activities. This can help you to avoid any mistakes in future and you will be able to conduct your transactions in a smooth manner without any issues. You can also browse the official web portal of the income tax department and get complete updates about various changes made to the income tax laws.
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