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Income Tax rate cut to half

Wednesday, Feb 1, 2017,13:07 IST By metrovaartha A A A

New Delhi | Jaitley pacifies with IT sops owing to address demonetisation woes. Though the income tax exemption ceiling has been retained at 2 lakhs in general and 2.5 lakhs for women the rate of tax has been cut in to half upto total income 5 lakh.
The finance minister said that the existing rebate of Rs. 5,000 available on income up to Rs. 5 lakh has been reduced to Rs. 2,500 and will be applicable to assessees up to income of Rs. 3.5 lakh.
Jaitley said the Govt is to reduce existing tax rate for income of Rs 2.5 to 5 lakhs to 5% from 10%. “50% saving in income tax if one person is earning up to Rs 5 lakh” according to FM words.
Due to the change in policy the tax liability of all persons below Rs. 5 lakh income will reduce either to zero (with rebate) or 50 per cent of their existing liability.
There would be zero tax liability for people with income up to Rs. 3 lakhs and the tax liability will only be Rs. 2,500 for people with income between Rs. 3 lakh and Rs. 3.5 lakh.
Tax foregone from deduction in tax rate at Rs 15,500 cr. To levy surcharge of 10% on income between Rs 50 lakh-1 crore.
Jaitley also is to reduce corporate tax to 25% for companies with a turnover of upto Rs 50 cr. Basic customs duty on LNG cut to 2.5% from 5%. Political parties will need to file income tax returns. Govt trying to bring more people into tax net. Simplified Tax Return Forms For Those Earning Salary Income Upto Rs 5 Lakh will be introduced.
Net tax revenue growth at 17% for last 2 years. Thrust of tax proposals will be to stimulate growth. Profit linked-deductions for start-ups reduced to 3 years out of 7 years. Propose carry-forward of MAT to 15 years from 10 years; Not practical to remove MAT, says FM.
Propose to reduce tax for small companies with turnover of less than Rs 50 cr to 25%. Net revenue loss in direct tax could be Rs 20,000 cr due to exemptions. Greater accountability on tax officers for errors of commission & omission.
Propose to make changes in capital gains tax for housing. Instead of build-up area, carpet area will be counted for affordable housing. Holding period for land & building will be reduced to 2 yrs from 3 yrs.
GST implementation to bring more taxes to states & centre. Total resources to be transferred to states & UTs estimated at Rs 4.11 Lk Cr. Defence expenditure excluding pension at Rs 2.74 lakh cr. Not proposing many changes to indirect taxes given GST roll-out plan.