What comes as a piece of good news to the middle-class salaried employees, i.e. those earning within the bracket of Rs 2,50,000 – Rs 5,00,000 per annum, Finance Minister Arun Jaitley reduced the rate of taxation from the exiting 10% to 5%. This would reduce the tax liability to zero (with rebate) or 50% of their existing liability for all persons earning below Rs 5 lakh.
Citing the reason as giving relief to the honest tax payers and salaried employees who project their income correctly, the Finance Minister (FM) — while presenting the Union Budget 2017-18 in the Parliament on February 1, 2017 — said that at present the burden of tax seems to be mainly on those earning within the bracket of Rs 2.5 lakh to Rs 5 lakh. Thus, post demonetisation, it was only right that this class of people get a relief from the burden of taxation.
The following are the highlights of the taxation on salaried persons.
The Finance Minister in the Union budget has clearly projected that the government wants to help the honest tax payers. In fact, the now nominal rate of taxation will see many more salaried employees coming within the tax net. In an appeal to the citizens falling in the lowest slab of Rs 2.5 lakh to Rs 5 lakh, the FM urged them to help towards nation building by paying the nominal rate of 5% of their income.
- There will be a simple formality of a simple one-page form to be filed as Income Tax Return (IT-R) for the category of individuals having taxable income up to Rs 5 lakh other than business income.
- Any person filing a return for the first time will not be subjected to scrutiny in the first year.
- The rate of taxation will be 5% for the slab Rs 2.5 lakh- Rs 5 Lakh.
- The existing benefit of rebate under Sec 87A available to assesses with an income up to Rs 3.5 lakh will be reduced from Rs 5,000 to Rs 2,500.
- The combined effect of both the reduction of percentage of tax and the rebate will mean zero tax liability for people getting income up to Rs 3 lakh per annum, and a tax liability of only Rs 2,500 for people with income between Rs 3 and Rs 3.5 lakh.
- The rate of taxation for all other slabs will remain the same.
- The subsequent slabs will get a uniform benefit of Rs 12,500 per person.
- A new levy has been introduced which is a surcharge of 10% that will be charged from individuals falling in the Rs 50 lakh and Rs 1 crore slab.
- The surcharge of 15% on income of more that Rs 1 crore to remain.
- The direct tax proposals for exemptions, etc. would result in revenue loss of Rs 22,700 crore.
- The revenue gain of Rs 2,700 crore for additional resource mobilisation proposal taken into consideration the net revenue loss in direct tax would come to Rs 20,000 crore.
The Other Highlights of Union Budget 2017
- Cash transaction will be allowed only up to Rs 3 lakh.
- Electoral bonds for political funding will be issued through an amendment to the RBI Act. Donors may purchase bonds from banks (through cheque or digital payments); the parties may encash these through their designated official accounts.
- Political parties will be allowed to receive donations only by cheque or through online transfer.
- A cap of Rs 2,000 has been set on cash donations to political parties.
- Capital Gains tax to be exempted, for persons holding land from which land was pooled for creation of Andhra Pradesh capital at Amravati.
- Aadhar-enabled payment system will be launched soon.
- Under the Pradhan Mantri Mudra Yojana the lending target has been doubled to Rs 2.44 lakh crore for 2017-18.
- Corporate tax to remain the same. However, income tax for small companies with an annual turnover of 50 crore has been slashed by 5 percent to 25 percent.
- There is also a proposal to confiscate the properties of economic offenders who have fled the country.
The government will be incurring a total expenditure of Rs 21.47 lakh crore in the Budget 2017-18.
The Union Budget 2017 focuses on the poor and the marginalised, including the farmers and salaried middle class. The measures adopted by the National Democratic Alliance’s aims at erasing the vast gap between the rich and the poor in the country.