Union Budget 2017: Relief for earnings up to Rs 5 lakh

New Delhi: Softening the demonetisation blow, the Budget for 2017-18 on Wednesday halved the tax to five per cent on incomes up to Rs 5 lakh but proposed a new surcharge of 10 per cent on incomes between Rs 50 lakh and Rs 1 crore and raised duties on cigarettes and pan masala while stepping up allocations for infrastructure, rural, agriculture and social sectors.

While the surcharge alone would net Rs 2,700 crore a year, the finance minister’s give-away on direct tax proposals will result in a loss of Rs 15,500 crore.

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The change in the personal income tax rate for individual assessees between Rs 2.5 lakh and Rs 5 lakh income would reduce the tax liability of all persons below Rs 5 lakh to either to zero (with rebate) or 50 per cent of their existing liability. Against the backdrop of demonetisation, the Budget has also barred transaction in cash above Rs 3 lakh.

Small taxpayer gets tax relief
He proposed to levy a surcharge of 10 percent on individuals whose annual  taxable income is between Rs 50 lakhs and Rs 1 crore. The existing surcharge of 15 per cent of tax on people earning more than Rs 1 crore will continue.

However, the Budget has proposed a fee for delayed filing of income tax return. A fee of Rs 5,000 shall be payable, if the return is furnished after the  due date but on or before the December 31 of the assessment year. A fee of Rs 10,000 shall be payable in any other case. But, in a case where the total income does not exceed Rs 5 lakh, the budget proposed that the fee amount shall not exceed Rs 1,000.     

Mr Jaitley said that his proposal to slash personal income tax to 5 per cent on those with income of Rs 5 lakh would reduce their tax liability either to zero (with rebate) or 50 per cent of their existing liability.

“These measures will mean that there would be zero tax liability for people getting income upto Rs 3 lakhs per annum  and the tax liability will only be Rs 2,500 for people with income between Rs 3 and Rs 3.5 lakhs. If the limit of Rs 1.5 lakh under Section 80C for investment is used fully the tax would be zero for people with income of Rs 4.5 lakhs,”  said the finance minister.

He pointed out that all the other categories of tax payers above Rs 5 lakh will also get a uniform benefit of  Rs 12,500 per person.

“The new levy of surcharge of 10% on income levels between Rs 50 lakh and  Rs 1 crore will result in additional tax liability by almost Rs 2.77 lakh at the top end of this income range. For such taxpayers, the increase in tax liability for 2017-18 will be approximately 9.5% over their annual tax liability under the current tax rates,” said Alok Agrawal, Senior Director, Deloitte Haskins & Sells.

Mr Jaitley  said there will be no scrutiny of assessees filing income tax returns for the first time.  Individuals having taxable income up to Rs 5 lakh can just fill up a simple one-page form for filing their tax returns. Meanwhile income tax officers can now reopen tax cases for up to 10 years if search operations reveal undisclosed income and assets of over Rs 50 lakh. Currently, I-T officers can go back up to 6 years to scrutinise the books of accounts of assesses.