Income Tax Declaration To Employer: 8 significant changes to be noted

The following are the significant changes in tax laws in FY18 that a tax payer must be aware of before submitting a tax declaration:

1) Individuals with income between Rs 2.5 lakh and Rs 5 lakh will be liable to pay only 5 per cent tax, as compared to 10 per cent earlier. Further, a rebate of Rs 2,500 will be provided under section 87A, compared to Rs 5,000 earlier. While there will be no rebates applicable for individuals with income above Rs 3.5 lakh.

2) Individuals with income ranging between Rs 50 lakh and Rs 1 crore will have to pay a surcharge of 10 per cent, while a surcharge of 15 per cent will be applicable for income above Rs 1 crore. While a marginal relief in levy of surcharge will be extended to individuals with incomes only marginally exceeding Rs 50 lakh or Rs 1 crore mark.

3) From FY18, no tax saving deductions will be applicable for investment in Rajiv Gandhi equity saving scheme, which has been eliminated.

4) Reducing tax benefits on properties, the government will allow a deduction of Rs 2 lakh on interest repayment on home loan for self occupied properties, while for rental properties, an annual deduction of upto Rs 2 lakh will be available for rental properties, after making adjustments of the rental income.

5) Moreover, a 5 per cent TDS (tax deducted at source) will be applicable for rental incomes above Rs 50,000 per month.

6) The holding period of a property to qualify as long-term capital gains is reduced to two years, from three years. Thus property transactions post two years of purchase will not attract short term capital gain taxes.
The base year for calculating indexation of cost is shifted to 2001 from 1981.

7) A penalty of Rs 1,000 will be imposed on individuals, with income not exceeding Rs 5 lakh, who have not filed IT returns. While for individuals earning more than Rs 5 lakh, the penalty will be Rs 10,000. Whereas the tax officers can scrutinise book of accounts of assessees going back to upto six years.

8) According to the Pradhan Mantri Awas Yojana (Urban) for middle-income groups, individuals applying for home loan for their first homes will be eligible to receive subsidy on interest repayments under the credit linked subsidy scheme for middle income groups.