The Upcoming Change In Income Tax And Why It Is Required
It is the times of demonetisation and the country is struggling. While every black money holder is reaping the fruit of their self-sown poison, the common middle-class household has also been backing up in this fight against corruption at the expense of their own troubles. As the queue increases in front of one ATM that is generating notes of lower denominations, so does the frustration level. Narendra Modi again comes to the rescue of the honest citizens. Joining hands with Arun Jaitley, the Union Budget 2017 will be announced on 1st February 2017. While the exact details will only be clear during the official introduction of the budget, there are some tentative changes that have been promised.
Basic Framework Of Union Budget 2017
The first propaganda is to focus on direct taxes like Income Tax and Corporate Tax instead of state imposed taxes. An agenda will be declared to abolish indirect taxes with the introduction of the GST. So, the primary focus will be on the direct taxes, resulting in economic growth. The Income Tax drafted for 2017 will ensure a major change to favor the honest citizens who were affected negatively by demonetization. Thus, there will be more returns in form of dividends and taxpayers will be able to retain a larger majority of the income as compared to previous years. This will compromise for the adversities faced because of demonetization and will work further in the favor of cashless, transparent transactions. Income Tax relaxation will be seen in 2017 by raising the limit of tax exemption and moderating the amount of tax to be paid, but there will be greater transparency norms as per income expenditure is concerned.
Corporate Tax Rates
With the introduction of the Union Budget, 2017 there will be a fall in the corporate tax rates, thus enabling organizations to function in a more profitable way in the face of demonetisation. According to Arun Jaitley, the corporate tax rates which were 22% to 23% previously, will be reduced to 18%, which is a huge moderation that will lead to high profit rates.
Return On Dividends
The budget was revised last year by imposing an additional 10% tax on dividends higher than 10 lakhs per annum. But this year a more complacent budget is being drawn in that respect. Thus the taxes on income through dividends will be moderated and the high earning citizens have to pat comparatively less.
Effect On Income Tax
The positive side of demonetisation will be seen in Income Tax 2017. All income tax payers will be having a huge advantage with the tax exemption limit raised up to 2.5 lakhs. Though the personal tax amount will remain the same, it will change indirectly via the tax slab division. The tax slab division will be made broader, making sure that the majority of earning citizens fall in the lower slabs. Thus their tax rates will automatically reduce. The action plan is as defined with an example: While till date, 30% tax rate is imposed on an annual salary of 10 lakhs and above, the same rate may be jumped to a greater income, while an income of 10 lakhs will fall under lower tax slab category.
Summary Of Income Tax Rates
The framework of the tax slab of personal Income Tax will be redefined in 2017 as follows:
- Up to income of 3 lakhs per annum: complete exemption from income tax.
- Income between 3 lakhs per annum to 10 lakhs per annum: 10% income tax.
- Income between 10 lakhs per annum to 20 lakhs per annum: 20% income tax.
- Income above 20 lakhs per annum: 30% income tax.
Aiming At Globally Equitable Tax Rates
The new tax rates are aimed at one agenda: DEVELOPMENT. The global tax rates are between 16-25% and thus by bringing down corporate taxes to 18%, India will be at the average rate and making its taxes equivalent to most countries. There will also be strict monitoring of import and customs operations to avoid corruption in form of foreign and Indian currency exchange. Thus the 10% income tax rate will be maintained for employees in that field. Also, the Goods and Services Tax will be introduced, which will help in maintaining a common tax rate on products all over India instead of state level division of excise duty and service taxes.
The Conclusive Result Of Union Budget 2017
In order to yield positive results the Union Budget 2017 has cut Income tax rates. This is because the government’s new scheme is to broaden the economic base by achieving tax rates equivalent to other nations. Plus with demonetisation, a note of higher denominations have been introduced. This INR 2000 note is not easily exchangeable for lower denomination cash. The GPS chip in the note makes it easily traceable and thus it cannot be used as for unlawful transactions. The only way out here is cashless transactions. Cutting tax rates will indirectly generate more revenue while maintaining a transparency in public expenditure via cashless methods.
Thus Union Budget 2017 will be pleasantly welcomed by every law abiding citizen of India.