Union Budget 2017-18 has proposed certain modifications in the tax structure for certain categories of assessees. We have presented the proposed changes for following categories of assessees referred below:
a). Resident Individuals less than 60 years of age (hereinafter referred to as “individuals”)
b). Resident individual of the age of 60 years or more (hereinafter referred to as “senior citizen”)
c). Resident individuals of the age of 80 years or more (hereinafter referred to as “very senior citizen”)
d). HUF, AOP and BOI
e). Partnership firms/LLPs
f). Corporates
Let’s go one by one and understand the changes proposed for each of these categories of assessees.
A. Individuals, HUFs, AOPs and BOIs
- Change in the existing rate of income tax applicable on income between Rs. 2.5 lacs to Rs. 5 lacs from 10% to 5%
- Differential surcharge of 10% and 15% where total income exceeds Rs. 50 lakhs and Rs 1 crore respectively.
Accordingly the proposed tax structure is presented below. Proposed modifications are highlighted in bold italic.
- Rebate under Section 87A
It is worthwhile to note here that the budget has proposed amendments to the rebate payable under section 87A as well.
It is proposed that a resident individual having income up to Rs. 3.5 lacs will entitled to a rebate of tax payable [excluding education cess] or Rs. 2,500 whichever is less. Earlier the rebate amount was restricted to Rs 5,000 on income upto Rs 5 lacs. In nutshell:
| Particulars | FY 2017-18 | FY2016-17 |
|---|---|---|
| Available to | Resident Individual | Resident Individual |
| Total income eligible for rebate | <=3,50,000 | <=5,00,000 |
| Maximum rebate | Rs 2,500 | Rs. 5,000 |
- Marginal relief
Marginal relief is available to ensure that the additional income tax payable, including surcharge of 10% or 15% on the excess of income over Rs. 50,00,000 or Rs. 1,00,00,000 as the case may be is limited to the amount by which the income is more than Rs. 50,00,000 or Rs. 1,00,00,000 as the case may be. However, no marginal relief shall be available in respect of the education cess.
- Alternate minimum tax (AMT)
If the adjusted total income of a person exceeds Rs. 20 lacs, AMT is calculated @18.50%.
No change has been proposed in the AMT rates. AMT continues on non-corporate assessees such as partnership firms, sole proprietorships, AOPs, HUFs, BOIs, etc.
B. Senior and Very senior Citizens
Basic exemption income slab in case of senior citizen and very senior continues to remain the same at Rs. 3,00,000 and Rs. 5,00,000 respectively. The modifications as to rate will apply to these categories as well.
The proposed amendment for rebate under 87A continues to apply to senior and very senior citizens as well.
At different levels of income, the proposed tax incidence will be as follows:
C. Partnership firms/LLPs
The Budget has proposed no changes in the tax rates for partnership firms or LLPs. The effective tax rates for partnership firms/LLPs for FYs 2017-18 and 2016-17 are as follows:
| Partnership firms/LLPs | FY 2017-18 | FY2016-17 |
|---|---|---|
| Total income upto Rs 1 crore | 30.90% (including 3% cess) | 30.90% (including 3% cess) |
| Total income exceeding Rs 1 crore | 34.608% ((including 12% surcharge) and 3% cess thereon)) | 34.608% ((including 12% surcharge) and 3% cess thereon)) |
D. Corporates
Corporates are classified as domestic companies and foreign companies under tax law.
Domestic companies
The budget has proposed differential tax rates for domestic companies based on annual turnover or gross receipts. The reference year is proposed to be FY 2015-16.
Accordingly, tax rate of domestic company with annual turnover or gross receipts not exceeding Rs. 50 crores in FY 2015-16 is pegged at 25% [plus applicable surcharge and education cess thereon].
The proposed effective tax rates for companies for FYs 2017-18 and 2016-17 are as follows:
There is no change in the MAT rates. Further, there are no changes in the dividend distribution tax rate. (DDT)
Foreign Companies
There is no change in the tax rates.
Keep visiting www.taxingtax.com for further updates on Budget 2017-18.
