Why it is important to get your tax affairs in order post Budget 2017
How to avoid flak of tax officials
A slew of proposals announced in Budget 2017 are aimed at ensuring greater tax compliancy. As the government widens the tax net and restricts use of cash, we consider the imminent changes to help you get your tax affairs in order.
TDS on rent above a limit
If your rent is more than Rs 50,000 a month, you will now have to deduct 5% as TDS while paying your landlord, from June 1, 2017. “This move will check tax evasion by salaried individuals who claimed HRA (house rent allowance) exemption against bogus rent receipts,” says chartered accountant Amit Maheshwari, Partner, Ashok Maheshwari & Associates. Though one has to furnish the PAN of the landlord when rents exceed Rs 1 lakh a year, the PANs are rarely checked by employers. Henceforth, those claiming HRA for rents above Rs 50,000 a month would have to produce the tax deduction receipt to employers. The only relief for tenants here is they will not require a TAN (tax deduction and collection account number) and have to deduct the tax at one go once in a fiscal.
Penalty for late filing
Till now, there was no penalty if you filed your income tax return after the due date but before completion of the assessment year. From assessment year 2018-19, a late fee of Rs 5,000 will be levied if returns are not filed by December 31 of the relevant assessment year. After that, the penalty will be Rs 10,000. However, if your total annual income is less than Rs 5 lakh, the late fee would not exceed Rs 1,000. “File returns on time. Else you may end up paying a fine even if you have paid all your taxes,” says Kuldip Kumar, Partner and Leader, Personal Tax, PwC India.
Less time to revise
Existing provisions allow you to revise your income tax return any time before the expiry of a year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. From April 1, 2018 you can only revise your tax return up to the end of the assessment year or before the completion of assessment, whichever is earlier. “Don’t miss the filing deadline. Else, you will lose the opportunity of revising the return and also get exposed to other penal consequences depending on the nature of omission,” cautions Kumar.
Cap on cash payments
From April 1, 2017 you can no longer receive more than Rs 3 lakh in cash a day from any single person, or for a single transaction, or for different transactions relating to one event or occasion from a person. If you do, you will be liable to penalty equal to the amount received. High-value transactions now will have to be mandatorily carried out through banking channels. But this can give rise to new market specific challenges, say experts.
Cash expenditure slashed
Businessmen or professionals making cash payments of over Rs 10,000 will not get any deduction in respect of capital expenditure from assessment year 2018-19. Earlier, this limit was Rs 20,000. If payments above Rs 10,000 are not routed through the banking system, they will be considered income under profit and gains from business or profession in the year of payment and taxed accordingly. “This move will affect small businesses where cash is generally used to pay small vendors,” says Maheshwari.
Limit on donations
From April 1, 2018, cash donations above Rs 2,000 to charities and the like will not fetch any tax benefits under Section 80G. Earlier this limit was Rs 10,000.