Budget 2017 Highlights -10 changes every investor must aware

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Today Finance Minister published the Budget. Let us see the Budget 2017 highlights and also how it will impact our personal finance. I know it was the highest expected budget due to demonetization.

Union Budget 2017 Highlights

Let us understand the changes done in Budget 2017.

Budget 2017 Highlights

1) Income Tax Slab Rates for FY 2017-18  or AY 2018-19 changed

There is a slight change in Income Tax Slab Rates for FY 2017-18 or AY 2018-19. They are as below.

Income Tax Slab Rates for FY 2017-18 or AY 2018-19

# Earlier for individual the tax rate for the income range of Rs.2,50,000 to Rs.5,00,000 was 10%. Now it is reduced to 5%.

# Same way, for Senior Citizens (Age above 60 years but below 80 years) the tax rate for the income range of Rs.3,00,001 to Rs.5,00,000 was 10%. This now slashed to 5%.

2) Surcharge for super rich

Earlier the surcharge of 15% was applicable to those whose income is over and above Rs.1 Crore. However, now the if your income exceeds Rs.50 lakhs but below Rs.1 Crore then you have to pay 10% tax.

Therefore now the surcharges are as below for super rich individuals.

  • If the total income exceeds Rs.50 lakhs but below Rs.1 Cr0re, a surcharge of 10% will be levied.
  • 15% surcharge on income tax if the total income is over and above Rs.1 Crore.

3) Rebate under Sec.87A reduced to Rs.2,500

An individual who is resident Indian and whose total income does not exceed Rs. 3,50,000 is entitled to claim rebate under section 87A.

Hence, HUF or NRIs are not eligible for this rebate. Also, do remember that this rebate is not available for super senior citizens.

Earlier the rebate was Rs.5,000 for those whose income is up to Rs.5,00,000. However, from FY 2017-18 it is now reduced to Rs.2,500 and income range to Rs.3,50,000.

Hence, now let us an individual earning’s taxable income is Rs.3,00,000. Now the tax on this at 5% will be Rs.2,500. He can easily claim rebate under Sec.87A and reduce his tax liability to ZERO.

4) Holding period of immovable property for long term capital gain reduced

Earlier holding period of immovable property for long term capital tax was 3 years. Now it reduced to 2 years. Hence, this is the biggest boost to property holders.

Because if you buy today and sell after 2 years, then it will be considered as long term holding and taxed accordingly. I think this is bit a relief to all real estate owners.

5) The base year for indexation calculation is changed from 1st April, 1981 to 1st April, 2001

For calculation of taxation on capital gains like debt funds or immovable properties, we consider indexation benefit. For this, earlier the base year was 1st April, 1981. But not the base year changed to 1st April, 2001.

This is one more good news to all those who has to pay tax based on indexation benefits. It will dramatically reduce the tax liability.

6) You can’t transact more than Rs.3,00,000 in cash

To promote the digital economy and also to curb black money, Government decided to bring in the new law where you are not allowed to transact above Rs.3 lakh in cash.

For this purpose, a new IT Section was introduced. This is Section.269ST. The highlights of IT Section.269ST are as below.

  • This Rs.3,00,000 limit is per person and per day.
  • Also, this is related to single transaction.
  • Provisions of this section will not apply to in case of receipt of money by Government, any banking company, post office savings bank or co-operative bank.

7) One-page Income Tax Return Form

In order to promote tax filing from all individuals, Government will introduce the one-page income tax return form. This form can be used by those whose income is less than Rs.5 lakh and also they must have other than business income.

Also a person of this category who files income tax return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high-value transaction.

8) Changes in National Pension Scheme from Budget 2017

If your NPS account is at least 10 years old, then you will be eligible for withdrawing 25% of contributions (without accrued income earned thereon). Employer contributions cannot be withdrawn. This 25% is tax-free during withdrawal but will be within the 40% overall tax tax-free withdrawal limit.

9) Service Charge on e-tickets booked through IRCTC removed

Earlier the service tax on e-tickets booked through IRCTC was removed after the demonetization. However, now this is permanently removed to improve the cashless economy.

The service tax was Rs.20 on Sleeper and Rs.40 on AC classes for booking tickets through IRCTC.

10) Limit in set off of loss from “Income from House Property”

In respect of any assessment year, the net result of the computation under the head “Income from house property” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to set off such loss, to the extent the amount of the loss exceeds Rs.2 lakhs, against income under the other head.

Earlier there was no such set-off limit. This I think the negative news for real estate owners (especially those who have more than one home).

These are the major points which I saw as Budget 2017 Highlights.

The biggest expectation of an increase in Sec.80 limit has not happened. The only good thing that we can say is 5% reduced in income tax rate.

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32 Responses

  1. Hi Basu

    Housing loan (Me and Wife)

    1. We both are joint holders and joint borrower
    2. We have only one home
    3. We are living on rent and claiming HRA and due to job cant shift or stay at house

    1. Can we both claim loss on house property upto 2 lacs (current limit) considering we both pay equal installments and show equal rent received in case flat is rented out
    2. or 2 lacs limits is for second home only and we can claim full deduction

  2. Please elaborate the last point loss from Income from house property. I could not understand how it is a loss for investor? The language you have used is quite technical. I belong to a non-financial background, please explain it in a layman’s language.

    1. Dhruv-Plainly there may not be loss. However, if you are owning second property then calculation may tilt towards the loss. I will soon come up with a post on this topic. Wait till that period.

  3. Dear Basu,
    I have another query on next FY income tax calculation.Govt proposed 87A rebate i.e.Rs.2500/-to those salaried individual whose taxable income is upto Rs 350000/-.Now my question lies in “taxable income”.Suppose my gross income is 490000/- and after all deductions(i.e 80C and others),my taxable income is 340000/-.Can I avail the benefit of 87A rebate in coming financial year?.Please clarify…

    1. Uttam-Yes, the income limit here explained in this section is NET INCOME. Hence, if after deduction what left for taxable income is less than Rs.3,50,000, then you are eligible for claim rebate.

  4. Hi Basu,

    on 31st December 2016, Prime minister has shared scheme regarding fix rate of returns for senior citizen.
    However, during budget session there was no information given on to this one particularly.

    do you know any thing about it? can we get that scheme in LIC or post office where Senior citizens can fix rate of interest for 10 years or so?

    thanks and regards,

  5. Hi,

    I have been in the industry for 6 years now but unfortunately I have not invested anywhere so far.May be I didn’t has adequate money to think about that.I have met with a number of agents also for investment planning and all but didn’t get any confidence out of it.Currently I am getting 50+ in hand.

    Can you please guide me with the plans I should go for.


        1. Vivek-How much you invest is not a question. But what are your financial goals, current income and expenses, current investments, future financial goals and how you planned for emergencies. Such all information a must before suggesting.

  6. Dear Sir
    Thanks for presenting highlights concisely and nicely. Found very useful.
    Relief seems to be marginal and good for those in lower bracket only.

  7. Dear Basu,
    Thanks for analysis.I asked a question about 87A.
    Please download the following pdf document and check page 35 ,article 174.

  8. Hi Basu,
    I have a question about 87A rebate.I came to know from some news link that 87A is applicable to those salaried individual whose taxable income is within 3.5 K and rebate is reduced to Rs 2500/-.Is it true?

  9. Hi Basu,

    I am currently having my company stock that is listed in UK and not in India. I have paid 10k every month from my salary for this. The advantage of this scheme is that if I stay in company for more than 3 years they will match 1 share for every 3 share that I have bought.

    My question to you is if I decide to sell shares and get money back how will the tax treatment for this will be done ? I am currently in 30% bracket.

  10. Dear Sir,
    Very Good article with nice explanation. But its very sad that he did not touch the 2nd and 3rd Slab. Not even slight benefits given in last 3 years. Not much to cheer about for these persons. It seems that earning high income in INDIA is crime, because of taxes.

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