14
T
he
U
nion
B
udget
2017-18
Personal Income Tax: Proposed Change
In order to broaden the tax base and in order to incentivise honest
tax payers and salaried employees, the finance minister proposed
certain changes in taxation on personal income.
Though the income slabs were kept unchanged, changes were
made in the tax rate for individuals. The following are the income
slabs and tax rates proposed by the finance minister.
For individual Tax Payers
Tax Slabs
(2017-18)
Income
(
R
)
Tax Rate (%)
0 mn – 0.25 mn
0%
0.25 mn – 0.5 mn
5%
0.5 mn – 1 mn
20%
Above 1 mn
30%
The following points were proposed for individual tax payers:
• Existing rate of taxation for individual assessees between
income of
R
0.25 mn to
R
0.5 mn is proposed to be reduced to
5% from the present rate of 10%.
• It has been proposed to introduce a surcharge of 10% on
tax payable by individuals whose annual taxable income is
exceeding
R
5 mn but not exceeding
R
10 mn. The surcharge
on tax payable by individual whose annual taxable income is
exceeding
R
10 mn remains unchanged.
• In order to incentivize cash less economy and transparency,
it is proposed that no deduction shall be allowed under the
section 80G in respect of donation of any sum exceeding two
thousand rupees unless such sum is paid by any mode other
than cash. This amendment will take effect from 1st April,
2018 and will, accordingly, apply in relation to the assessment
year 2018-19 and subsequent years.
• It has been proposed to reduce the period of holding from the
existing 36 months to 24 months in case of immovable property,
being land or building or both, to qualify as long term capital
asset. Also, the base year for indexation has been proposed to
be shifted from 1.4.1981 to 1.4.2001 for all classes of assets
including immovable property.
• It has been proposed to amend the section 54EC so as to
provide for investment in any bond to be eligible for exemption,
if it is notified by the Central Government and redeemable after
three years. This amendment will take effect from 1st April,
2018 and will, accordingly, apply in relation to the assessment
year 2018-19 and subsequent years.
• It has been proposed to phase out the deduction under section
80CCG (i.e. Rajiv Gandhi Equity Saving Scheme-RGESS)
from assessment year 2018-19. However, assessees who
have claimed deduction under this section for assessment
year 2017-18 and earlier assessment years shall be allowed
deduction under this section till the assessment year 2019-20.
This amendment will take effect from the 1st April, 2018 and
shall accordingly apply in relation to assessment year 2018-19
and subsequent years.
• It has been proposed that setting-off of loss under the head
“Income from house property” against any other head of
income shall be restricted to
R
2 lakhs for any assessment
year. However, the unabsorbed loss shall be allowed to be
carried forward for set-off in subsequent years in accordance
with the existing provisions of the Act. This amendment will
take effect from 1st April, 2018 and will, accordingly apply in
relation to assessment year 2018-19 and subsequent years.
Details of tax deductions
Amount
(
R
)
Deduction u/s 80C
1,50,000
Deduction u/s 80CCD
50,000
Deduction u/s 80D on health insurance premium for
self
25,000
Deduction on account of interest on house property
loan (Self occupied property)
2,00,000
Deduction u/s 80EE* on interest paid on loan by an
individual for acquisition of a residential house
property
50,000*
Exemption of transport allowance
19,200
* For first time home buyers
Mutual Funds
Consolidation of schemes:
It is proposed to provide that cost
of acquisition of the units in the consolidated plan of mutual fund
scheme shall be the cost of units in consolidating plan of mutual
fund scheme and period of holding of the units of consolidated
plan of mutual fund scheme shall include the period for which the
units in consolidating plan of mutual fund scheme were held by
the assessee.
Debt Market Outlook
The Union Budget for FY18 was neutral from the perspective
of Indian bond markets. The finance minister continued to
follow the path of fiscal consolidation in line with market
expectations;
although the finance minister shifted the FRBM
target by another year to push through higher public spending
for providing an impetus to economic growth.
The fiscal deficit
target for FY18 has been estimated at 3.2% of GDP as against
earlier estimates of 3% of GDP in the previous budget.
The
fiscal deficit target of 3% of GDP for FY19 remains unchanged from
the previous estimates.
The gross and net market borrowings
for FY18 have been pegged at
R
5.8 trillion and
R
3.48 trillion,
respectively; and have remained largely unchanged from the
current fiscal’s revised market borrowings. The revised gross
and net market borrowings for FY17 were
R
5.82 trillion and
R
3.47 trillion.
On the day of the Budget the yields of the 10-year benchmark
G-secs fell initially on announcement of lower fiscal deficit and
net borrowings by the finance minister. However, the yields of the
