The Union Budget 2017, was one of the most anticipated budgets in many years. Many of us were looking forward for some relief after the pain one had to go through demonetization. It did offer some relief but to only those who got affected the most – small income group and farmers. However there was not much to offer for middle to higher income groups.
What it means for you?
Let us start with bad news first:
- If your annual income is between 50 lacs and 1 crore, you should be prepared to pay an additional 10% surcharge over and above the tax you have bee paying (those over 1 crore will continue to pay a surcharge of 15%).
- For those holding more than one real estate property and claiming loss of interest, you will be not be able to avail loss of more than 2 lakhs going forward (bringing it at par with self occupied property). However, any loss above the limit could be carried forward for next 8 years.
- If you have been paying a rent of more than 50k, responsibility of deducting TDS will come on your shoulders. Similarly if you have a property on rent fetching more than 50k, you should be prepared to have TDS deducted by your tenant.
- There is also bad news for those who delay filing their Income Tax returns. You will now have to penalty of 5000 for delay until Dec (of AY) and 10000 for any delay beyond that.
With this out of our way, let us look at how it will benefit you:
- The tax rate of lowest slab has been brought down to 5% (from 10%). It translates to a saving of 12, 500 for everyone above that tax slab.
- If you have been thinking of selling the real estate property, this might bring some cheer to you as the definition of long term capital gains has been reduced to 2 years (from 3 years earlier).
- You might even have lower Capital Gains as the base year of indexation has been shifted to 2001 (from 1981 earlier).
- If you are self employed or a business owner, budget brought additional benefit for you. The tax rate of MSME (turnover less than 50 crores) has been reduced to 25%. Moreover, you could claim deduction towards NPS upto 20% of your income (bringing it at par with salaried folks).
As you would have felt, there was not much tinkering done on the taxation front. Indirect taxes were also left untouched as GST is underway.
Despite pre-budget rumours, good news is that Equity continues to be most tax efficient asset class (as the LTCG tax continues to remain zero). All these point out that the incentives seemed to be aligned towards moving investments from physical assets to (regulated) financial assets.
The Budget was consistent with the government’s strategic direction, the key elements of which are:
- Accelerate growth, job creation and investments.
- Fiscal discipline, low inflation and interest rates
- Focus on agriculture / rural incomes / housing for all by 2022.
- Reduction of informal economy, simplification of taxation and widening of tax base
Just like our house budget, table below gives a good snapshot of how Union budget looks:
How the Govt earns
How the Govt spends
Have you checked the Union Budget? Don’t be surprised, there is a dedicated website – http://unionbudget.nic.in/
Why not take some baby steps towards understanding more about Union Budget of India. It will be worth your while.