Most Important Changes in Tax Compliance for FY 2017-18

Overview the most important changes in Tax Compliance for FY 2017-18. Every year Annual Budget presented in Parliament brings important Tax Compliance revisions in the way tax is calculated or income declared. This is made statutory with the passage of the Finance Act by February end every year.

Here, we outline some of the major amendments announced in Budget 2017:

Modifications in Maintenance of Books of Accounts (Section 44AA)

If your income from Business or Profession net of losses in FY 2017-18 is greater than INR 2.5 lakh OR if your gross receipts from Business or Profession in the same year is more than 25 lakh in any of the last 3 years just prior, then you must compulsorily maintain books of accounts.

Earlier these limits were 1.25 lakh and 10 lakh respectively.
If the business is new, then the limits would be INR 1.2 lakh and INR 10 lakh respectively.

These changes apply to individuals and HUFs filing their ITRs online.

Important changes affecting your return filing period of limitation:

 When can a ‘Belated return’ be submitted?

1. In Assessment Year 2018-19, fresh and belated returns and rectified returns can be filed up to 1 year from the last date, ie, 31 March of 2019.
2. You can file the first two for FY 2015-16 till the end of March, 2019. Belated ITRs are not allowed for this year or before.
3. For FY 2016-17, fresh and belated returns must be filed by 31 March 2018 and revised declarations by 31 March, 2019.

Penalty for late filing of IT return (Section 234F):
Ordinarily, the due date to file your ITR is 31 July of the year after the relevant Financial year. The new Section, 234F levies a fine of INR 5000 if the tax form is submitted after the due date but before 31 December and INR 10,000 if furnished after.
The marginal relief provided is that this fee will not cross INR 1000 if you earned less than 5 lakh in the year.

Note that these charges in addition to interest on tax arrears.

Earlier the penalty was imposed at the discretion of the Assessing Officer. Now it has been made mandatory. 

Payment of TDS by tenants paying a rent of INR 50,000 or more a month (Section 194 IB):

Tenants who fulfil the above condition must pay TDS by furnishing PAN instead of TAN (TDS Account number). No TDS return is necessary either.
The rate of tax is 5% of the rent paid in the last month of the FY or tenancy if earlier. The deductor must also report the PAN of the landlord failure to do which may result in TDS rates leaping up to 20% of the rental payment.

In no case shall the tax amount exceed the actual rent paid in the final month of accommodation.

Revised Limit to set off loss on House Property income against other income:
From the Financial Year 2017-18 you will be able to claim and adjust loss in income from House Property against any other income only up to a limit of Rupees 2 lakh.

The remaining amount can be carried forward against the same head (Income from House Property) for the next 8 years.

In the year before, there was no such limit.

Revised limit for Cash Payment against Expenses and Capital Expenditure
For Financial Year 2017-18 the ceiling for cash payments to one person in one day is INR 10,000 provided the payment is for non-capital expenditure.

For capital expenditure, too, the limit for cash payment is INR 10,000 but if the amount due exceeds this limit then it will not be lumped in asset cost.

In FY 2016-17, the respective caps were INR 20,000 and none for expenses and capital expenses in that order.

Revised time period for considering a Capital Gain as a Long Term Capital Gain
For the Financial Year 2017-18, immovable properties: land and/or building would be required to be held for 24 months instead of 36 months to be eligible for income/loss from capital gains to be considered as long term.

You can claim the benefit of the Cost Inflation Index while calculating income tax due after this period of 24 months.

Capital gains exempt from tax if invested in certain bonds (Section 54EC)
Bonds issued by the NHAI or RECL when transferred to give a long term capital gain and re-invested in whole or in part in another long-term asset within 6 months of the date of transfer carried an exemption from income tax capped at INR 50, 00,000/-

This provision has been extended to other notified bonds redeemable after 3 years. So now you have greater choice in determining bond purchases to make smarter tax saving investments.

Revised limit for Tax Deduction for Donations made in Cash (Section 80G (5D))
The upper limit for donations to specified funds and charities that can be made in cash to be eligible for deduction from income tax under Section 80G is Rupees 2,000 from FY 2017-18.

Earlier this limit was Rupees 10,000.

Revised limit for Contributions to Pension schemes under Section 80CCD

Section 80CCD(1) allows employees making contributions to NPS to have the entire amount or 10% of their salary deducted from the annual taxed income. The same benefit is received by income earners not being the employees of an employer.

80CCD(2) lets employees gain another subtraction of 10% of salary toward the employee’s contribution to the pension fund. Thus they derived a total benefit of 20% of their salary on account of this deduction.

In order to bring non-employees on par with employees, they, too, have been allowed a deduction of 20% of income for computation of levy.

As and when new updates become available, you can hear about them and understand them better on these pages. Happy Tax Planning from AllindiaITR!