According to Article 112 of the Indian Constitution, the Union Budget of India, also referred to as the annual financial statement, is a statement of the estimated receipts and expenditure of the Government of India for that particular year. The budget, this year was presented on 1st February 2017 as in November 2016, Prime Minister, Sri Narendra Modi announced a shift in date of budget from the last date of February every year to 1st of February this year.
Following are some of the key highlights of Budget 2017 for individual tax payers –
Lower tax rate – Finance Minister proposed the Income Tax slab 2017-18 which reduces the income tax rates from 10% to 5%, for individuals falling in the lowest income tax slab of Rs 2.50 lakhs – Rs 5 lakhs.
Reduction in Section 87A rebate It has been proposed to be reduced to Rs 2500 from the existing Rs 5000 for individuals earning between Rs 2.5 lakh to 3.50 Lakhs.As a result of the combined effect of the new Section 87A rebate and the reduction in the lowest slab tax rate to 5%, the tax burden for those with income upto Rs 3 lakhs will now be zero and tax burden of those in the Rs 3 lakh to Rs 3.5 lakh bracket would be Rs 2500.
Zero tax for those earning upto Rs 4.50 Lakhs – Income Tax slab 2017-18 also ensures that those earning Rs 4.5 lakh can reduce their tax liability to zero by fully availing the tax rebate of Rs 150,000 allowed under Section 80C of The Income Tax Act 1961.
Surcharge for super rich – Individuals earning between Rs 50 lakh to Rs 1 Crore will now have to pay a surcharge of 10% on the total income tax payable by them. Currently, there is no surcharge on tax for this category. Only those with income above Rs 1 Crore were required to pay a surcharge of 15% which continues. This has been done with an intention to tax the rich more.
Fee for late filing of IT return – Stricter rules have been proposed for not filing income tax returns (ITR) on time. There will be a fee of Rs 5,000 if the tax return is filed after the due date but before 31 December of the assessment year. If IT returns are filed after that, the fee will be 10,000. However, the fees will be lower at 1,000, if the annual income of the taxpayer is up to 5 lakh.
RGESS (Rajiv Gandhi Equity Scheme) – Tax exemption under this scheme has been withdrawn. Introduced in Budget 2012, to encourage retail participation in the stock market and mutual funds but it failed to take off as desired.
Tax-exemption for NPS -Tax-exemption NPS Partial withdrawal up to 25% of the contribution made by an employee would be exempted from tax.
One page Income Tax Return (ITR) One-page ITR Form to be devised by the Government to promote easy tax filing by individuals whose income is less than Rs 5 lakhs.
No question asked for first time return filer – A person having an income of less than Rs 5.00 Lakhs and filing the income tax return (ITR) for the first time would not be subjected to any scrutiny in the first year unless there is some specific information available with the Income Tax Department.
Change in the base year for indexation – The base year for indexation calculation is changed from 1st April 1981 to 1st April 2001. Indexation benefit is considered for calculation of taxation on capital gains arising out of investments in debt funds or immovable properties.
Let us now have a look at the Proposed income-tax slabs for FY 2017-2018 (Assessment year 2018-19) as announced in Budget 2017 for individuals falling under different age groups
Surcharge @10% of for taxable income between Rs 50 Lakhs to Rs 1 Crore and 15% for taxable income > Rs 1 Crore
Surcharge @10% of for taxable income between Rs 50 Lakhs to Rs 1 Crore and 15% for taxable income > Rs 1 Crore
Surcharge @10% of for taxable income between Rs 50 Lakhs to Rs 1 Crore and 15% for taxable income > Rs 1 Crore
As you can see that the new Income Tax Slabs2017-18 have been revised to help all the income groups (excepting the super-rich) to save more and therefore, pay less tax. Let us understand this with examples –
Example (A) Aruns present earning is Rs 450,000 per annum but he may not have to pay any tax if he saves Rs 150,000 under Section 80C of the Income Tax Act 1961. Anil can choose to buy a Life Insurance savings plan and opt for protection and savings under a single plan. This is a unique proposition for Arun as it not only takes care of his family and protects them financially in case of his unfortunate death; it also saves taxes for Arun under Section 80C while he is alive.
Example (B) Somnath works in an IT company and earns Rs 16.50 Lakhs. Somnath wants to provide his son the best possible higher education. Somnath invests in a child Insurance plan by paying an annual premium of Rs 150,000. By taking this policy Somnath ensures that his sons education needs are fulfilled by the staggered payouts that he will receive from 15th policy year till the end of the 20th policy year. Not only that, in the case of unfortunate death of Somnath, his son will receive the full sum assured and will continue to get the future benefits from the policy without paying any premium. Somnath also saves around Rs. 45,000 by way of taxes by paying the premium of Rs. 150,000 for this policy. Not only that, Somnath saves an additional Rs. 12,500 as the tax rates has been reduced in the Income Tax slab 2017-18
There can be many examples like that. The key takeaway is that irrespective of the Income Tax slab you are falling in, you must take full advantage by investing under Section 80C of The Income Tax Act 1961.
There are various kinds of life insurance policies, like term plan, Child insurance plan, Unit linked insurance plans, endowment plans and annuity or pension plans. You must choose appropriate life insurance plans suiting to your various financial planning needs and save taxes for you while protecting not only your financial future but the financial future of your family and the dependents too.
This article was sponsored by Bharti Axa Life Insurance.