Union Budget 2017 Impact AnalysisRight Horizons

Union Budget 2016Changes Announced Applicable To Implications

Reduction in Income Tax rates Individual Taxation for Income between Rs.2.50 to Rs.5 lakhs is - reduced to 5% from the present rate of 10%

Income Tax Rebate IndividualWhere Income is less than Rs.3.5laks:- Reduction in the rebate to Rs.2,500 from Rs.5,000- Eligibility criteria reduced from Rs. 5 lacs to 3.5 lacs

Restriction on cash transactions Individual Cash transaction is limited to - Rs.300,000 with some exceptions

Income Tax Surcharge Individual Where Taxable Income is between Rs.50laks to Rs.1cr- Surcharge of 10% on the tax liability has to be paid

Reduction in cash donations Individual Cash donation U/S 80G- Permissible is Rs.2,000 (Rs. 10,000 previously)

Capital gains Investors

The long term capital gains on equity shares or equity-oriented mutual funds transferred would be exempt from tax, if STT was charged at the time of acquisition of such shares / units. This, however, will not include cases of purchase where STT was not applicable e.g. IPOs, FPOs, Bonus / Rights Issue, ESOPS ..

Penalty for delayed income tax returns Individual

Rs.5,000 would be the penalty if the returns are filed after the due date but on or before Dec 31st of the Assessment Year

For any other case, the penalty would be Rs.10,000

However, if the total income is Rs.5 lakhs or less, the penalty levied would not exceed Rs.1000

Union Budget 2016 - ContinuedChanges Announced Applicable To Implications

Long Term Capital Gain and Indexation Investors

Reduction in the holding period for computing long term capital gains:- To 2 years from 3 years Change in the base year of Indexation:to 1- Apr-2001 from 1-Apr-1981 for all classes of assets including immovable property

Restriction on set-off of loss from House property Investors

Losses from the house property can be set off against other Income- To Maximum of Rs.2laks (full amount earlier)- The remaining loss can be carry forward and set off over next 8 years

Withdrawal under National Pension System (NPS) Investors - Partial withdrawal up to 25% of contribution is tax free

- Self-employed can also claim 20% contribution to NPS as deduction

TDS on Rental Income Individual and HUF TDS of 5% to be deducted by the LesseeIf the Rent is more than Rs. 50,000 per month

Guaranteed interest deposits Senior Citizen Senior Citizen- 8% guaranteed pension for 10 years by LIC of India scheme

Small And Medium Enterprise Self Employed Self Employed- Companies turnover less than 50 crores will pay 25% (30% earlier)

Scenarios for change in Individual Income tax rates

Taxable Income (Rs.)

Individual (Income level) ₹ 10,00,000 ₹ 20,00,000 ₹ 60,00,000 ₹ 1,10,00,000

Current Proposed Current Proposed Current Proposed Current Proposed

Basic Tax 1,25,000 1,12,500 4,25,000 4,12,500 16,25,000 16,12,500 31,25,000 31,12,500

Surcharge - - - - - 1,61,250 4,68,750 4,66,875

Education cess 3,750 3,375 12,750 12,375 48,750 53,213 1,07,813 1,07,381

Total Tax Payable 1,28,750 1,15,875 4,37,750 4,24,875 16,73,750 18,26,963 37,01,563 36,86,756

Increase/(Decrease) in Tax -12,875

-12,875 1,53,213

-14,806

% change -10.00% -2.94% 9.15% -0.40%

Thank You

Right Horizons Financial Services Pvt. Ltd.

www.righthorizons.com rachna@righthorizons.com- 9845399780