IMPORTANT AMENDMENTS FOR F.Y. 2017-18

There are a few important changes made in Budget 2017. Understanding these amendments is important for tax planning and tax saving point of view.  Let’s go through some important amendments in the Income-tax provisions for Financial Year 2017-18.

• Change in limits for Maintenance of Books of Accounts (Section 44AA)

If your net income* from Business or Profession in the Financial Year 2017-18:

1. is more than Rs 2,50,000/- OR
2. if your total sales from Business or Profession in the financial year is more than 25,00,000/-

then you need to maintain the books of accounts. Earlier these limits were Rs. 1,25,000 and Rs. 10,00,000 respectively.
*Net Income means Gross receipts less all expenses

• Important changes relating to Filing of Income tax Returns

• Fees for late filing of the income tax return (Section 234F)

The due date of return filing is generally 31st July of the Assessment Year. If the return is filed upto 31st December of relevant Assessment Year , then late filing fees of Rs 5,000/- will be mandatorily levied and Rs 10,000/- will be levied if the return is filed after 31st December of the relevant Assessment Year.

However, if total income does not exceed Rs 5 Lakhs, late filing fees cannot exceed Rs 1000.

Till financial year 2016-17, if the returns are not filed within due date which 31st July of the Assessment Year, then the Assessing Officer, at his discretion, may impose a penalty on the Assessee (that is the penalty was not mandatory to be imposed).

Click here to read more about Section 234F.

• Section 194-IB is inserted for Individuals and HUF who pay rent exceeding Rs 50,000/- per month

1. Individuals and HUF who pay rent to a resident exceeding Rs 50,000/- per month or part of the month, TDS at the rate of 5% is to be deducted on the total rent amount paid.
2. TDS is to be deducted during the tenancy period only in the last month of the financial year or last month of the tenancy or at the time of payment of such rent, whichever is earlier.
3. Also, PAN of the landlord is required to be furnished while making the payment of said tax. If the PAN is not been furnished to tenant, then TDS at the rate of 20% will be deducted. Such higher TDS deducted cannot exceed the amount of rent paid in the last month.
   
4. Deductor is not required to file the TDS returns and also not required to obtain the Tax deduction Number (TAN).

• New limit for claiming maximum loss of House property against Other Income

Till Financial Year 2016-17, for let out property, the entire loss from the said property could be adjusted against Other Income (without any limit).

But from Financial Year 2017-18, the set-off of losses from House property, whether self occupied or let out,  in a year is restricted to Rs. 2 Lakhs, to be adjusted against any other income.
Balance loss can be carried forward for set off against House Property Income in future till next 8 years.

• Change in limit of Cash Payment for Expenses and Capital Expenditure

Till Financial Year 2016-17, the limit for any cash payment made to a single person in a single day against any expenses was Rs 20,000. This said limit was not applicable to capital expenditure.
Now, the limit for any cash payment against expenses made to a single person in the single day is Rs 10,000. Also, cash payment made against capital expenditure on asset for more that Rs. 10,000 will not be added in the cost of the asset.

• Change in period for considering Capital Gain as Long Term

Till Financial Year 2016-17, immovable property, being land and building or both were considered as Long Term Capital asset after holding it for more than 36 months.

Now from Financial Year 2017-18, immovable property, being land and building or both will be classified as Long term Capital Asset after holding it for more than 24 months.
Thus, Indexation benefit will be available after completion of 24 months.

• Exemption in Capital Gain if Invested in certain Bonds (Section 54EC)
  

The existing section 54EC allows exemptions up to Rs 50 lakhs in respect of long-term capital gains invested in bonds issued by NHAI or RECL only, within a period of six months after the sale of long term capital asset.
Now, not only the investment made in NHAI and RECL will classify for exemption but also the investment in any notified bonds which are redeemable after three years shall be eligible for this exemption.
This amendment has widened the scope for investments of capital gain which has arisen from Long term Capital Asset.

• Deduction for Donations made in Cash (Section 80G)

Till Financial Year 2016-17, deduction for cash donation was allowed upto Rs. 10,000/-.
Now the limit for donations in cash has been reduced to Rs. 2,000/-. Thus, if donation is made in cash for more than Rs. 2000/-, no deduction will be allowed.

• Change in limit for Contribution to NPS (Section 80CCD)

1. The employee or other individuals shall be allowed a deduction for amount deposited in National Pension System trusts (NPS).
2. The deduction under section 80CCD(1) cannot exceed 10% of salary in case of an employee or 10% of gross total income in case of other individuals.
3. For employees, additional deduction of 10% of salary is allowed with respect to employer contribution under section 80CCD(2). Thus, employees get overall deduction of up to 20% of the salary income.
4. In order to remove such disparity, from A.Y 2018-19, deduction u/s 80CCD(1) to non-salaried persons, has been increased to 20% of gross total income from the earlier limit of 10% of gross total income.
   

In order to know income tax slab rates for financial year 2017-18 , Click here .

Understanding these amendments in Income Tax for the new Financial Year 2017-18 will help you plan your taxes better!