Source | Business Today : By Renu Yadav
It is that time of the year when many of you would be giving your investment declarations for the year to your employer. Based on the investment declaration given by the employee in the beginning of the financial year, the employer deducts tax from the salary every month. So, before making the investment declaration it will be good to know the new tax rules applicable from the current financial year 2017-18.
1) The tax rate for income slab of Rs 2.5 lakh – Rs 5 lakh has been reduced from 10 per cent to five per cent. This reduction in tax rate will result in a tax benefit of Rs 12,500 for taxpayers. If you add education cess (2 per cent), and higher and secondary education cess (1 per cent) to it, the tax saving will increase to Rs 12,875.
2) The tax rebate enjoyed by the taxpayers under Section 87A has been reduced from Rs 5,000 to Rs 2,500. Earlier, it was available to those with a taxable income of Rs. 5 lakh, whereas now the limit has been reduced to Rs 3.5 lakh.
3) In case of let out property, the set-off of ‘loss from house property’ from other income streams has been limited to Rs 2 lakh in a financial year. There was no cap on it earlier . So, if there was a loss from house property as the entire interest of home loan for a let out property was tax deductible, you could set off the entire loss against any other source of income hence reducing the tax burden substantially. But now, you can set off losses only up to Rs 2 lakh while can carry forward the loss for next eight years. But as in the initial years the interest cost is high, the tax savings will reduce substantially due to the Rs 2 lakh cap.
4) In another move to encourage people to save more for their retirement, partial withdrawals from National Pension System (NPS) – up to 25 per cent of the contribution made by the employee – have been made tax-free. Moreover, self-employed individuals will now be eligible to claim deduction of up to 20 per cent of their gross total income, as against the existing 10 per cent, in respect of contribution made to NPS. This would be subject to the overall deduction limit of Rs 1.5 lakh.