While there are no changes proposed in personal Income Tax rates and slabs, the Government has made certain key proposals to provide relief to small taxpayers, especially to middle class and salaried earners in the form of:
- Rebate on tax for total income of up to INR 5,00,000/- for individuals
- Increase in standard deduction from INR 40,000/- to INR 50,000/- for salaried employees
- Relief for owners of more than one house; second self-occupied house not to be subject to tax on deeming/notional basis; aggregate deduction of interest on home loan for self-occupied properties retained at INR 2,00,000/-
- Prescribed monetary threshold for deduction of tax on interest from bank or Post Office deposits increased from INR 10,000/- to INR 40,000/-
- Proportionate exemption on long-term capital gains arising from proceeds of sale of residential house extended to purchase of two residential houses from one house, subject to: – Amount of capital gain not exceeding INR 2 crore/- [no monetary threshold for investment in one residential house]. It’s a One-time opportunity to claim such exemption.
INTERIM BUDGET INSIGHT: CORPORATE TAXES
Domestic companies with a turnover not exceeding INR 250 crore during FY 2016-17 continue to enjoy a reduced tax rate of 25% (increased by applicable surcharge and cess). The base year for this reduced tax rate is proposed to be extended to domestic companies with turnover not exceeding INR 250 crore for FY 2017-18.
The provisions relating to TDS on rental payments provide for a monetary threshold of INR 1.8 lakh. This threshold has been enhanced to INR 2.4 lakh.
Certain key amendments have been proposed in the Interim Budget to provide relief and give an impetus to the Real Estate sector, including the affordable housing market:
- The provisions were introduced wide Finance Act 2017 to tax notional income on rentals from property held as stock-in-trade for a period beyond one year from the end of the financial year in which the certificate of completion of property was obtained. This period of holding is proposed to be increased to two years.
- Under the present provisions, deduction on profits is available to developers who are engaged in developing and building affordable housing projects. One of the conditions, i.e. the time taken to seek approval for a project from the competent authority, is proposed to be extended to 31 March 2020.
- The Government envisages a push towards technology-intensive tax assessments and return processing within the next two years. This is directed towards eliminating personal interface and bringing transparency.