Tagged: Tax Planning

The Union budget of 2017 brought mixed bundle of joy for the taxpayers.  While the section 80EE was re-introduced, holding period was lowered which brought cheers for the taxpayers, on the other hand, the individuals claiming a loss on the let out property or deemed to be let out property were left in shock. 

Many of you who already own a second house or looking to buy a new house might give a look at the rules listed below to receive the often missed benefits. 

1.  You can claim tax benefit on interest paid even if you missed an EMI. 
Section 24 of the I-T act mentions the word interest payment “payable” on housing loan.  It means that even if you have missed the EMI payment in a year you can still claim the tax benefit on it.  It can be claimed as a deduction so long as the interest liability is there. 

Kuldip Kumar, Partner and Leader – Personal Tax, PWC says, “One should retain the copy of the interest certificate issued by the lender i.e. bank or NBFC specifying the amount of loan, interest due etc.  as this will help in case of any questioning from the tax department.” 

The principal repayment deduction under Section 80C, however, is available only on actual repayments. 

2.  Principal repayment tax benefit is reversed if you sell before 5 years. 
While the finance minister may have provided a relief by reducing the holding period to 24 months to qualify for the long-term capital gains but if you sell a house within five years from the date of purchase, or, five years from the date of taking the home loan, the tax benefit gets reversed. 

“The deduction claimed will be added back to the income of the taxpayer in the year in which the property is sold,” says Archit Gupta, founder, Cleartax.com

However, the loan amortisation calculations are such that the repayment schedule has lower component of principal repayment in the initial years of the home loan and the tax reversal rule only applies to Section 80C. Also, the benefit of lowered holding period for capital gains will apply from April 1, 2018, AY only. 

3.  You are eligible for tax break only when you are a co-borrower and co-owner. 
You cannot claim a tax break on a home loan even if you may be the one who is paying the EMI.  For instance, there may be a situation when you’re paying the EMI of a home loan for the property which is owned by your parents or spouse. 

“However, when the house is in the joint name and funded by both the spouses by a way of housing loan, both husband and wife can avail the separate deduction for the interest payments and principal repayment of such loan,” says Kumar. 

Even if you own a property with your spouse, you can’t claim deductions if your name’s not on the loan book as a co-borrower. 

4.  You can claim pre-construction period interest for up to 5 years. 
Any interest paid on the borrowing during the construction of a house is eligible for tax relief only after you have received the completion certificate. 

“Interest paid during the construction period can be claimed as a tax deduction in five equal instalments starting from the year in which construction of the property is completed.  The total tax benefit will be annual interest payable + 1/5th of the pre-construction period “says Gupta. 

While filing returns for the AY 2017-18, the maximum limit for the self-occupied property is Rs 2 lakh.  In the case of let out property, there is no limit. 

The union budget 2017 has removed this anomaly and put the cap of Rs 2 lakh on the let out property.  The same will be effective while filing the returns for next year i.e. 2018-19. 

5.  Re-introduction of the Section 80EE
To provide an additional relief to the homebuyers, the section 80EE has been reintroduced with effect from April 1, 2017.  The maximum deduction available has been reduced from earlier of Rs 1 lakh to Rs 50,000 now. 

However, this deduction comes with certain restrictions which need to be satisfied while availing this deduction.  The conditions are:
a) The home-owner/s should be first time buyer even if the property is bought in the joint ownership,
b) The loan value must not exceed Rs 35 lakh and property value should not exceed Rs 50 lakh, and
c) The loan must be sanctioned by a financial institution during the period April 1st, 2016 to March 31st, 2017. 

Archit Gupta, Founder & CEO, Cleartax.com says, “If the taxpayers are able to meet conditions for both of section 24 and 80EE, their taxable income can be reduced by 2.5 lakhs in FY 2016-17 return filing.” 

6.  Processing fee and other charges are tax deductible. 
Most taxpayers are unaware that charges related to their loans such as processing fees or prepayment charges qualify for tax deduction.  As per law, these charges are considered as interest and therefore deduction on the same can be claimed. 

“Section 2(28A) of I-T Act defines interest as interest payable which includes any service fees and other charges in any manner in respect of money borrowed,” says Kumar. 

Therefore, it is eligible for deduction under Section 24 against income from house property.  Other charges also come under this category but penal charges do not. 

Also, any payment made towards stamp duty and registration fees incurred by the individual are also tax deductible as per the section 80C(2) (xviii) (d) of the act. 

7.  Loans from relatives, friends and employer are eligible for tax deduction. 
If you have taken a loan from friends and/or relatives to acquire a house then you can claim a deduction under Section 24 for interest repayment on loans.  You can also claim a deduction for money borrowed from individuals for reconstruction and repairs of property. 

“A taxpayer would need to obtain a certificate from the relative which would contain the details such as the amount of interest payable, amount of loan taken, specifying the property details for which loan is taken,” says Kumar. 

However, one must remember that this rule is only applicable for interest repayment.  You cannot avail the tax benefits available on the principal repayment on that part of the loan borrowed from your relatives, friends and employer. 

Further, a lender, in this case, your relatives and friends must disclose the interest earned on such transaction while filing their income tax returns. 

Now the limit that can set off against the loss from rented house property has been restricted to Rs.  2 lakh per annum. 
Edited by Surajit Dasgupta | Last Updated: April 09, 2017 16:48 (IST) | NDTV Profit

The government has changed income tax rules that could increase the tax outgo of those who have taken a home loan for a property that has been rented out.  The amount that could be set off on home loans for rented property has been reduced.  Earlier, in case of rented property, the loss from house property – which is basically the interest paid on home loan minus rental income – was allowed to be adjusted from income without any limit.  This helped significantly reduce tax liability.  Now the limit that can set off against the loss from rented house property has been restricted to Rs.  2 lakh per annum.  This came into effect from April 1, 2017 (assessment year 2018-19). 

However, on rented properties, the interest paid above Rs.  2 lakh can be carried forward for eight assessment years.  Since the interest component of home loan repaid in initial years is higher, experts say that the borrower may not be able to fully adjust the interest paid as deduction even in subsequent years. 

For example, your interest outgo on a second property is Rs.  5 lakh in a particular year.  Assume that you are earning a rent of Rs.  1.5 lakh annually from the property.  Such buyers, as per the current rules, are allowed to adjust the difference of Rs.  3.5 lakh (Rs.  5 lakh interest minus Rs.  1.5 lakh).  But from the next financial year, they will be allowed deduction of just Rs.  2 lakh.  The remaining amount of Rs.  1.5 lakh (Rs.  3.5 lakh minus Rs.  2 lakh) can be carried forward up to eight financial years and be adjusted later. 

Tax experts say that some high net worth individuals – who used to buy properties on loan and were able to set off the full interest liability against the lettable value of property and thus bring down their tax liability substantially – would be particularly hit from this new tax rule. 

Note: Income tax rules say that those who own more than one property can only treat one of them as self-occupied and the rest have to be assumed to be rented.  Income tax has to be paid on notional rent. 

From April another tax rule related to the properties will also change.  The new tax rule will help bring down tax liability from property sale.  The holding period of a property for qualifying under long-term gains will get reduced to two years, from three years currently.  As per current tax norms, if a property is sold within three years of buying, the profit from the transaction is treated as short-term capital gain and is taxed according to the slab rate applicable to him/her.  So reducing this time period to two years will bring down tax liability. 

Thus, after two years, the transaction will be able to qualify for long-term capital gains, thus lower taxes.  Under long-term capital gains on immovable properties, the profit is taxed at 20 per after indexation.  Under indexation, inflation during the holding period is taken into account and thus the purchase price is adjusted, reducing the tax burden on the property seller.  There are also other benefits for the seller under the long-term capital gains tax.  If the gains are invested in some select government investment schemes, the tax liability goes down significantly. 

Tax experts say that some high net worth individuals, who used to buy properties on loan and were able to set off the full interest liability against the lettable value of property and thus bring down their tax liability substantially, would be particularly hit from this new tax rule. 
Written by Surajit Dasgupta | Last Updated: March 28, 2017 09:01 (IST) | NDTV Profit

Interest paid above Rs.  2 lakh on rented properties can be carried forward for 8 years from April 1. 

To address the anomaly of interest deduction in respect of let-out property vs self-occupied property, the government has changed income tax rules, which will come into effect from next financial year April 1, 2017 (assessment year 2018-19).  In this regard, the government has cut down tax benefits borrowers enjoyed on properties let out on rent.  According to current tax laws, for properties rented out, a borrower could deduct the entire interest paid on home loan after adjusting for the rental income.  On the other hand, borrowers of self-occupied properties get Rs.  2 lakh deduction on interest repayment on home loan. 

However, on rented properties, effective from April 1, interest paid above Rs.  2 lakh can be carried forward for eight assessment years.  Since the interest component of home loan repaid in initial years is higher, experts say that the borrower may not be able to fully adjust the interest paid as deduction even in subsequent years. 

For example, your interest outgo on a second property is Rs.  5 lakh in a particular year.  Assume that you are earning a rent of Rs.  1.5 lakh annually from the property.  Such buyers, according to the current rule, are allowed to adjust the difference of Rs.  3.5 lakh (Rs.  5 lakh interest minus Rs.  1.5 lakh).  But from the next financial year, they will be allowed deduction of just Rs.  2 lakh.  The remaining amount of Rs.  1.5 lakh (Rs.  3.5 lakh minus Rs.  2 lakh) can be carried forward up to eight financial years and be adjusted later. 

Tax experts say that some high net worth individuals, who used to buy properties on loan and were able to set off the full interest liability against the lettable value of property and thus bring down their tax liability substantially, would be particularly hit from this new tax rule. 

From April another tax rule related to the properties will also change.  The new tax rule will help bring down tax liability from property sale.  The holding period of a property for qualifying under long-term gains will get reduced to two years, from three years currently.  As per current tax norms, if a property is sold within three years of buying, the profit from the transaction is treated as short-term capital gain and is taxed according to the slab rate applicable to him/her.  So reducing this time period to two years will bring down tax liability. 

Thus, after two years, the transaction will be able to qualify for long-term capital gains, thus lower taxes.  Under long-term capital gains on immovable properties, the profit is taxed at 20 per after indexation.  Under indexation, inflation during the holding period is taken into account and thus the purchase price is adjusted, reducing the tax burden on the property seller.  There are also other benefits for the seller under the long-term capital gains tax.  If the gains are invested in some select government investment schemes, the tax liability goes down significantly. 

In some cases, the Income Tax Department may question the tax exemption taken on both HRA and home loan, says an expert. 
Written by Surajit Dasgupta | Last Updated: October 10, 2016 10:36 (IST) | NDTV Profit

HIGHLIGHTSIncome tax exemption on both HRA, repayment of home loan can be claimedHowever, taxman could ‘closely monitor’ such a situation, says an expertIncome Tax Department may disallow one of the claims, he adds

Yes, you can claim income tax exemption on both house rent allowance (HRA) and repayment of home loan.  If you are living in a house on rent and servicing home loan on another property – even if both the properties are located in the same city – you can claim tax benefit for both. 

But “this situation could be closely monitored by the Income Tax Department particularly where the amounts are relatively higher and may also disallow one of the claims if sufficient explanations are not available”, says Amit Maheshwari, managing partner at Ashok Maheshwary & Associates LLP. 

Mr Maheshwari cites some cases when the tax department may not raise questions:
When the person may have moved from rented house to own house during the year or vice versa

When the person’s own house could be smaller in size and the person may have moved to a bigger house rented by him/her

When the children of the person may be studying in the locality of the rented house and during the year it was not possible for him/her to change the school and consequently he/she was not able to move to the new house bought

But in some other cases, the Income Tax Department may question the tax exemption taken on both HRA and home loan, Mr Maheshwari adds. 

“Hence, in all such situations, the individual has to ensure that the related documentations (like lease deeds, possession/completion letters, etc.)  and justification regarding the same are readily available with him/her if the such query is raised,” Mr Maheshwari says. 

Salaried individuals who live on rent can claim HRA to lower taxes.  It is partially exempted from taxes.  However, if the individual does not live in a rented accommodation, HRA is fully taxable. 

The deduction on HRA is the lowest of the following under Section 10(13A) of the Income Tax Act:

Actual HRA received from the employer

50 per cent of (basic salary + dearness allowance) for those living in metro cities (40 per cent for non-metros)

Actual rent paid less 10 per cent of salary

On the other hand, if you are servicing a home loan you can claim tax benefits on principal and interest payments.  Principal repayment, under Section 80C of the Income Tax Act, is exempted up to Rs 1.5 lakh.  And on interest repayment, exemption can be claimed up to Rs 2 lakh, under Section 24. 

In this year’s Budget, the government had announced an extra deduction of Rs 50,000 on the interest component of home loan for first-time buyers, where the loan does not exceed Rs 35 lakh and the value of the property is up to Rs 50 lakh. 

Flexible payment schemes offered for under-construction property can lead to tax issues when the owner sells it.  It’s not clear in the Income-Tax Act whether the seller should take the indexation benefit from the date of getting possession of the house or if it can be calculated based on each instalment paid after registration. 

The flexible payment started with 80:20 scheme, where a buyer pays 80 per cent of the home value upfront either from his own funds or through a loan.  The remaining is paid on possession.  At present, there are many complicated variants of it such as 5:10:30:25:20:10 to help buyers to pay for a house without taking a home loan.  In most cases, the agreement for the flat is registered on payment of one or two instalments that establishes the buyer as a legitimate owner and prevents the developer from selling the house to another buyer when the rates go up. 

But when the owner sells the property bought through the flexible payment scheme, calculation of capital gains tax can get complicated if a person holds the property for more than three years, which makes it a long-term capital asset. 

The Income Tax Act says that in case of computation of long-term capital gains, the tax payer can index the cost of acquisition of the property since the date of acquisition to the date on which it has been sold. 

Indexation is done with the help of a Cost Inflation Index, which is notified every year by the tax authorities.  The first year when such an index was notified was in 1981-82 at a base value of 100 and the index notified for 2016-17 is 1,125.  If an individual purchases a house for Rs 20 lakh and sells it at Rs 50 lakh, he is liable to pay capital gains tax on the profit made, which is Rs 30 lakh in the example.  But the buyer can reduce this liability by using Cost Inflation Index.  The longer one holds the property; the lower would be the tax outgo. 

The complication

The correct method of calculating capital gains came up before the Mumbai Income Tax Tribunal, which was pronounced in July 2016.  The taxpayer had declared long term capital gains on sale of property at Rs 29,02,270 after considering the indexation benefit of Rs 19,93,232. 

The tax payer had become a member of a housing society in 1993 and was later allotted a flat in 1994.  The housing society constructed and allotted flats to all the members.  The taxpayer claimed that he had been paying proportionate cost of construction on various occasions from 1994 to 2006, as and when called upon by the society.  While calculating the indexed cost of acquisition, the tax payer adopted the cost inflation index, corresponding to each year of payment. 

The tax officer however held a different view.  He argued that the property tax assessment bill issued by the municipal corporation showed that the said flat was assessed to property tax from January 1, 2007 and therefore the date of acquisition of the property was to be taken as January 1, 2007. 

Accordingly, the tax officer’s cost indexation calculation was determined by adopting the said date, thereby increasing the tax burden on the seller.  The officer calculated the taxpayer’s additional liability at Rs 4,71,074.  The officer added this amount to the tax payer’s income.  At the first level of appeal, the appellate authority confirmed the tax officer’s view and decided the case against the taxpayer. 

Tribunal favours the taxpayer

At the Tribunal, the tax payer put forth his case that the benefit of indexation of cost should be granted to him right from 1994 when he started making payments and not from January 1, 2007 when the house was first subjected to property assessment. 

The tax officer argued that a property can be said to be acquired only after its possession is handed over to the buyer, and therefore adoption of date as the one he considered is justified. 

On considering the merits of the case, the tribunal observed that the society in question was allotted land by Maharashtra Housing and Development Authority or Mhada and the conveyance deed was made in favour of the society in 1994.  Being a member of the society, the tax payer was allotted a flat and was issued the share certificate in 1994.  It was also observed that an allotment letter for the specific flat was also issued to the tax payer in 1995. 

The Tribunal was of the opinion that it is not necessary that the taxpayer must become an owner by way of conveyance deed for the purpose of computing capital gains.  As the tax payer had acquired the right to obtain a specific flat in the society in 1994 itself, the indexation of the cost of acquisition of the flat has to be granted with respect to the initial date of 1994, subject to the fact that the indexation be applied to each instalment as and when the same was paid.  The case, therefore, was decided in the favour of the tax payer. 

Implications

The case provides an extremely useful tax planning measure for those who plan to purchase an under-construction house.  They must register the property as soon as possible and become the legal owners.  If they sell the property after holding it for more than three years after completion, they will get the indexation benefit even for the instalments paid. 

A registered agreement provides definitive details of the property such as flat number, floor, size of the flat, etc.  On the contrary, merely having allotment letter, which do not define the flat, will not be helpful.  In the past taxpayers with allotment letters did not get any relief in similar cases. 

The case in question had stronger facts: A society already existed and the taxpayer held share certificates.  These principles should equally apply to buyers in under-construction projects who would become society members post completion. 

TAX RELIEF
Calculating capital gains on property bought in flexible payments scheme can be complicated when the owner sells it

Income-Tax Act lacks clarity on whether the seller can calculate capital gains from the date of property registration or from the date of possession

Mumbai I-T Tribunal has ruled that date of possession is not necessary

Buyers should therefore register property as early as possible, which establishes them as legal owners

Buyers with allotment letters, which do not define the flat, have failed to get relief from tax authorities in the past

Don’t tinker with your long-term investment plan.  But it is always better to make some critical changes, based on new tax laws and instruments
Sanjay Kumar Singh | April 3, 2016 Last Updated at 22:10 IST | Business Standard

The start of a new financial year is a good time to review your financial plan and take stock of where you stand in relation to your goals.  If new goals have emerged, this is the time to make fresh investments for these.  While having a steady approach is a virtue here, make some adjustments in the light of developments that have occurred over the past year. 

Equity funds
Large-cap funds have fared worse than mid-cap and small-cap ones over the past one year (see table).  Over this period at least, the conventional wisdom that large-cap funds tend to be more resilient than mid-cap and small-cap ones in a declining market was overturned.  Nilesh Shah, managing director, Kotak Mahindra AMC, offers three reasons. “ For the bulk of the previous year, FIIs were sellers of large-cap stocks, whereas domestic institutional investors (DIIs) were buyers of mid- and small-caps.  Large-cap stocks are also more linked to global sectors like metal and oil, whereas mid- and small-caps are linked to domestic sectors.  The latter has done better than the former, leading to stronger performance by mid- and small-cap stocks.  Large-cap stocks’ earning growth decelerated or remained subdued throughout last year while mid- and small-caps delivered better growth,” he says. 

Despite last year’s anomalous performance, investors should continue to have the bulk of their core portfolio, 70-75 per cent, in large-cap funds for stability, and only 20-25 per cent in mid-cap and small-cap funds.  Large-caps could also fare better in the near future.  Says Ashish Shankar, head of investment advisory, Motilal Oswal Private Wealth Management: “IT, pharma and private banks, whose earnings have been growing, will continue to do so.  Public sector banks and commodity companies, whose earnings have been bleeding, will not bleed as much.  Many might even turn profitable.  FII flows turned positive this month and FIIs prefer large-caps.  With the US Fed saying it won’t hike interest rates aggressively, global liquidity should improve.  If FII flows continue to be stable, large-caps should do better.”  Valuations of large-caps are also more attractive. 

Debt funds
Among debt funds, the category average return of income funds and dynamic bond funds was lower than that of short-term, ultra short-term and liquid funds (see table).  Explains Shah: “Last year, while Reserve Bank of India (RBI) cut policy rates, market yields didn’t soften as much.  The yield curve became steeper.  The short end of the curve came down more than the long end, which is why shorter-term bonds did better than longer-term gilts.” 

Stick to funds that invest in high-quality debt paper, in view of the worsening credit environment.  Shankar suggests investing in triple ‘A’ corporate bond funds. “ Today, you can build a triple ‘A’ corporate bond portfolio with an expected return of 8.5 per cent.  Many of these have expense ratios of 40-50 basis points, so you can expect annual return of around eight per cent.  If bond yields come down, you could end up with returns of 8.5-9 per cent.  If you redeem in April 2019, you will get three indexation benefits, lowering the tax incidence considerably.”  Investors who have invested in dynamic bond funds should hold on to these. “ A rate cut is expected in April.  Yields will drop and there may be a rally in the bond market,” says Arvind Rao, Certified Financial Planner (CFP), Arvind Rao Associates. 

CHANGES YOU NEED TO MAKEInvestment

Fixed deposit rates from banks will be better than returns from the post office deposits in the new financial year

Choose your tenure first and then, do a comparison of bank fixed deposit rates before making the final choice

Invest in the yellow metal via gold bonds

Insurance

If your liabilities have increased, revise term cover upward

Revise health cover every three-five years to deal with medical and lifestyle inflation

Revise sum assured on home insurance if you have added to household assets

Tax planning

Conservative investors should invest in PPF at the earliest

Those who can take some risk should bet on ELSS funds via SIP

Invest Rs 50,000 in NPS

Traditional fixed income
The recent cut in small savings has jolted conservative investors.  The rates on these have been linked to the average 10-year bond yield for the past three months.  These will be revised every quarter now, make them more volatile. “ People who want to invest in debt and want sovereign security should continue to invest in Public Provident Fund (PPF).  No other instrument gives a tax-free return of 8.1 per cent with government security,” says Rao. 

As for time deposits, financial planner Arnav Pandya suggests, “From April, fixed deposits of banks will give better returns than those of the post office.  Decide on your investment tenure, see which bank is offering the best rate for that tenure, and invest in its deposit.”  Lock into current rates fast, as even banks are expected to cut their deposit rates. 

Tax-free bonds are another good option.  Nabard’s recent issue carried a coupon of 7.29 per cent for 10 years and 7.64 per cent for 15 years.  Beside getting tax-free income, investors stand to get the benefit of capital appreciation if interest rates are cut. 

“People who have some risk appetite may also look at debt mutual funds and fixed deposits of stable companies,” adds Rao. 

Gold
The sharp run-up in gold prices over three months, owing to the rise in risk aversion globally, took most people by surprise.  The sudden spurt emphasises the need to stay diversified and have a 10 per cent allocation to the yellow metal in your portfolio.  However, instead of using gold Exchange-traded funds (ETFs), which carry an expense ratio of 0.75-1 per cent, invest via gold bonds, which offer an annual interest rate of 2.75 per cent.  The Budget made gold bonds more attractive by exempting these from capital gains tax at redemption. 

Tax planning
Start investing in tax-saving instruments from the beginning of the year. “ Don’t leave tax planning for the end of the year, otherwise you may have to scramble for funds,” says financial planner Ankur Kapur of ankurkapur.in.  For those with the money, Pandya suggests: “Invest the entire amount you need to in PPF before the April 5.  That will take care of tax planning for the year and you will also earn interest on your investment.” 

Investors with a higher risk appetite could start a Systematic Investment Plan (SIP) in an Equity Linked Savings Schemes (ELSS) fund, which can give higher returns. “ If you invest early in the year via an SIP, you will reap the benefit of rupee cost averaging,” says Dinesh Rohira, founder and Chief Executive Officer, 5nance.com.  Pankaj Mathpal, MD, Optima Money Managers suggests linking all tax-related investments to financial goals. 

If you live in your parents’ house and pay rent to them to claim House Rent Allowance benefits, which is perfectly legal, get a rent agreement prepared. 

With 40 per cent of the National Pension System (NPS) corpus having been made tax-free at withdrawal in this Budget (the entire corpus was taxed earlier), this has become more attractive. “ Open an NPS account if you have not done so already and enjoy the additional tax deduction of Rs 50,000,” says Anil Rego, CEO & founder, Right Horizons.  In view of the low returns from annuities, into which 60 per cent of the final corpus must be compulsorily invested, don’t invest more than Rs 50,000. 

Tax deduction under Section 24 is available on the interest repaid on a home loan. “ Buying a property to avail of the benefit is not advisable if the family has a primary residence,” says Rego. 

Insurance
While reviewing your financial plan, check if the term cover is adequate.  A family’s insurance cover should be able to replace the breadwinner’s income stream.  Financial planners take into account household expenses, goals like children’s education and marriage, and liabilities like home loans when deciding on a person’s insurance requirement. “ If goals have changed or liabilities have increased, raise the amount of cover,” suggests Mathpal.  Kapur says the premium rate is likely to be lower if you buy the term plan before your birthday. 

Your health insurance cover might also need to be raised to take care of medical inflation.  The same holds true for household insurance if you have reconstructed your house and the structure has become more expensive, or if you have added expensive assets.  Rohira suggests buying add-on covers like accidental insurance and critical health insurance for comprehensive protection. 

Proposal (P): Increase the rate of surcharge on income exceeding Rs 1 crore to 15% from 12%.Impact (I): This will raise the maximum marginal rate of tax to 35.54% from 34.61% on the ‘super-rich’. 

P: Increase limit for tax rebate to Rs 5,000 from Rs 2,000 for resident individuals with a total income of up to Rs 5 lakh a year. I: This will ensure an additional saving of Rs 3,090 for small taxpayers. 

P: Raise deduction limit for rent paid by an individual who doesn’t have a house and isn’t entitled to HRA from the employer to Rs 60,000 pa from Rs 24,000 pa. I: This will allow the individual to claim an additional deduction of Rs 36,000 pa, leading to a tax-saving of up to Rs 13,015. 

P: Under the current provisions, dividend received by an individual from an Indian company is exempt from tax as dividend distribution tax (DDT) is already paid by the firm.  It is proposed to charge the individual an additional tax at 10% on the dividend received in excess of Rs 10 lakh. I: This will ensure that dividend earned by super-rich is also subject to tax in addition to the 15% DDT paid by Indian firms.  The maximum effective tax that the dividends bear will be 32.21% (i.e. 20.36%+11.85%). 

P: Make gains under the Sovereign Gold Bond Scheme, 2015, exempt from tax.  Also, provide indexation benefit on transfer of the gold bonds. I: This will give incentive for investing in gold bonds instead of the physical form. 

P: For rupee-denominated bonds, give tax exemption to non-resident investors on gains arising from currency appreciation between the dates of issue and redemption. I: This will attract non-resident investors to rupee-denominated bonds and help Indian companies raise funds abroad. 

P: Don’t subject NRIs to higher rate of TDS due to unavailability of PAN if they fulfil certain conditions. I: This will bring significant relief to NRIs. 

P: Introduce e-assessment and do away with physical presence during tax hearings. I: This will lead to an increase in paperless assessment and less face-to-face interaction between taxpayer and income-tax officers. 

P: Increase the threshold limit for TDS in case of withdrawal of PF balances to Rs 50,000 from Rs 30,000.I: Individuals with accumulated PF balances of up to Rs 50,000 will now not be subject to TDS on withdrawal. 

P: Individuals with rental income less than the maximum amount not chargeable to tax should furnish Form 15G/15H for non-withholding of TDS.I: This will bring huge relief to senior citizens and small taxpayers who have nil taxable income or income below the threshold limit but had to file I-T return to claim refunds of TDS deducted on rental income. 

P: Include exempt income from long-term capital gains on sale of equity shares or equity-oriented mutual funds to determine whether an individual is liable to file I-T return. I: To determine the requirement for filing a tax return, long-term capital gains on sale of equity shares or equity-oriented mutual funds that are exempt from tax also need to be included.  Also, individuals with only exempt income from long-term capital gains on sale of equity shares or equity-oriented mutual funds will now be required to file return if the total exempt income exceeds the maximum amount not chargeable to tax (currently Rs 2.5 lakh). 

P: Reduce the time-limit for filing of belated return to any time before the end of the assessment year or completion of assessment, whichever is earlier.  However, allow a belated return to be revised within a year from the end of the relevant assessment year or completion of assessment, whichever is earlier. I: This will reduce the time-limit for filing a belated return to one year from two years and encourage timely compliance.  Revision of belated return will now be permitted, which was not possible earlier. 

P: Amend advance tax payment schedule for individuals as (a) 15% of tax payable by June 15; (b) 45% of tax payable by September 15; (c) 75% of tax payable by December 15; and (d) 100% of tax payable by March 15.I: This will increase the compliance burden. 

P: Don’t subject to tax shares received by an individual in consequence of demerger or amalgamation of firms without adequate consideration. I: This will bring uniformity in tax treatment of shares. 

P: Exempt withdrawal in respect of contributions made on or after April 1, 2016, from a recognised provident fund and an approved superannuation fund, up to 40% of the accumulated balance. I: This will increase the overall tax liability. 

P: Exempt 40% of the total amount payable to individuals on closure/opting out of NPS.I: Will reduce tax liability.