Income tax slab slashed to 5% for Rs 2.5-5 lakh earners
The Budget gave relief to on personal income tax front, mainly the salaried group in the middle class, by halving the tax to five per cent up to the income of Rs 5 lakh to ease the pains of demonetisation. However, those earning above Rs 50 lakh and up to Rs one crore will have to shell out additional 10 per cent surcharge.
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The cut in the tax rate for the lowest slab will also save up to Rs 12,500 for incomes in other slabs, increasing disposable income of the middle class that can provide spur to the slowing down economic growth. The present super rich tax in the form of 15 per cent surcharge will remain for those earning income over Rs one crore.
The finance minister also put more money in the hands of small and medium enterprises by reducing the corporate tax rate to 25 per cent from the current 30 per cent for annual turnover up to Rs 50 crore. Ninety six per cent of companies which file returns come under this category.
Besides middle class and SMEs, the finance minister also addressed the concerns of foreign portfolio investors by exempting India-based funds them from the indirect transfer provisions. The government had put on hold the recent rules by the Central Board of direct taxes in this regard.
CBDT to be authorised to frame a scheme to issue centralised notice, calling for information and documents
Assessing officer can re-open the cases under Income Declaration Scheme for up to 10 years, against six years allowed at present, if there is verifiable evidence of undisclosed asset over Rs 50 lakh seized in searches
TDS to be paid by rent payer at the rate of 5%, if rent is over Rs 50,000 a month
Self-employed will be allowed 20 per cent deduction for their contribution to National Pension System
To merge authority of advance ruling for income tax and that for indirect taxes and create common authority
Thin capitalisation rules to debar subsidiary or branches of foreign companies from getting tax deduction if interest paid on debt is over 30 per cent of its Ebitda
Hard Facts on Tax Compliance
Ours is largely a tax non-compliant society. The predominance of cash in the economy makes it possible for the people to evade their taxes, burdening those who are honest and compliant.
Among the 37 million individuals who filed the tax returns in 2015-16, 9.9 million show income below the exemption limit of Rs 2.5 lakh per annum, 19.5 million show income between Rs 2.5 lakh and Rs 5 lakh, 5.2 million show income between Rs5 lakh and Rs10 lakh and only 2.4 million people show income above Rs10 lakh. Of the 760,000 individual assesses who declare an income of above Rs 5 lakh, 5.6 million are in the salaried class. The number of people showing an income more than Rs 50 lakh in the entire country is only 172,000. As against the estimated 42 million persons in the organised sector, the number of salaried individuals filing returns is only 17.4 million. The same is true for companies. Of the 1.4 million companies registered up to March 31, 2014, 597,000 have filed their returns for the assessment year 2016-17.
From the Budget speech