The only thing most taxpayers look forward in Budget is income tax changes and how it would impact them. Budget 2017 has been a mixed bag as far as income tax is concerned. During the budget speech Finance Minister announced lowering of taxes for income between Rs 2.5 lakhs to Rs 5 lakhs to 5% from existing 10%. This meant lower taxes but unfortunately “Devil lies in Details”.
We tell you about 3 set of people who would be paying more taxes in FY 2017-18 than in FY 2016-17.
- Senior Citizens with income between Rs 3.5 Lakhs to Rs 4 lakhs
- Taxpayers who have “Loss from House/Property” of more than Rs 2 Lakhs
- People with Income between Rs 50 lakh to Rs 1 crore
Below is the maths and reasons for each case listed above:
1. Senior Citizens with income between Rs 3.5 Lakhs to Rs 4 lakhs
- For Senior Citizens there is NO income tax up to income of Rs 3 lakhs
- The tax slab for income between Rs 3 to 5 lakhs has been reduced to 5% from 10%
- Rebate under Section 87A has been reduced from Rs 5,000 to Rs 2,500 for income up to Rs 3.5 Lakhs (earlier this limit was Rs 5 lakhs)
Let’s see the impact:
As can be seen in the tables above Senior citizens with Income between Rs 3.5 to 4 Lakhs have to pay more Income Tax mainly due to reduction in Section 87A.
2. Taxpayers who have “Loss from House/Property” of more than Rs 2 Lakhs
Many people especially with high income had bought multiple homes on loan to save tax. This “tax saving” technique had become very popular in recent times. Unfortunately this tax benefit is gone as the limit from “Loss from House/Property” that can be deducted against salary, business or other income has been capped at Rs 2 lakh. This is irrespective of the house is rented out or self-occupied.
Below is the impact:
3. People with Income between Rs 50 lakh to Rs 1 crore
Budget 2017 announced surcharge of 10% on income tax for people with income between Rs 50 lakh to Rs 1 crore. For people with income of more than Rs 1 crore, the surcharge of 15% on income tax continues.
Budget 2017: Who Pays Less Income Tax?
In terms of who saves the maximum in Income Tax outgo Next year, its people with income of Rs 1 crore or more. They would pay Rs 14,806 less in taxes. This is fair because they were the ones who were paying highest taxes!
Download: Tax Planning Guide for FY 2016-17
Penalizing senior citizens with more tax is bad move. My guess is government has not done all its calculation and hence changed Section 87A limit without thinking of senior citizens. This move would hardly garner much tax but call for bad publicity.