The Finance Act 2017, introduced multiple changes and it is necessary to keep track of these amendments while filing the return of income. Further the CBDT introduced the new ITR forms A.Y 2018-19 on 5^th April, 2018 with modifications as compared to the ITR forms of the previous A.Y. Here we list down 10 important changes that we need to focus on while filing the return of income of taxpayers who are required to furnish their return of income for A.Y 2018-19 by 31^st July, 2018.

1. INCOME TAX RATES

Even though the tax slabs remain the same, there has been a slight revision in the income tax rates. The income tax rate for the slab INR 2,50,001 – INR 5,00,000 (applicable to Individuals, HUF, AOP, BOI and Artificial Juridical Person) has been revised to 5% against the previous rate of 10%. For a resident individual aged between 60 and 80, the basic exemption limit is INR 3,00,000. For a resident individual aged 80 or above, the basic exemption limit is INR 5,00,000.

The tax slabs applicable for filing return of income for A.Y 2018 -19 for a non senior citizen are as below: 

2. REBATE UNDER SECTION 87A

A taxpayer can claim the benefit of rebate under section 87A if he/she fulfills both of the following conditions:

a. The taxpayer is a Resident Individual

b. The total income less deductions (under Chapter VI-A) is equal to or less than INR 3,50,000

Until A.Y 2017-18, the bar to claim rebate was set at INR 5,00,000 instead of INR 3,50,000

3. SURCHARGE AND CESS

The rates of surcharge applicable to Individuals and HUF have been revised A.Y 2018-19 onwards.

a. Where the total income of the Individual/HUF exceeds INR 50 lakhs but up to INR 1 crore, surcharge shall be levied at 10%.

b. Where the total income of the Individual HUF exceeds 1 crore, surcharge shall be levied at 15%.

The higher and secondary education cess shall continue to be levied at 3% for the current A.Y.

4. SET OFF OF LOSS FROM HOUSE PROPERTY

Up to A.Y 2017-18, there was no limit on the amount of loss arising from house property that could be set off against other heads of income. With effect from A.Y 2018-19 the set off of loss arising from house property against other heads of income is restricted to INR 2,00,000 and the unadjusted loss is to be carried forward for set off for eight subsequent assessment years only against house property income.

5. CAPITAL GAINS

a. Base Date for Cost Inflation Index (CII)

Earlier the Base Date for CII was 1^st April, 1981. However, with the changes brought about by the Finance Act, 2017, the base date for CII has been shifted from 1^st April, 1981 to 1^st April, 2001. The tax payers would have the option to consider the FMV of such asset as on 1^st April, 2001 or the actual cost of such capital asset as the cost of acquisition while computing long term capital gains. The cost of improvement would include capital expenditure incurred after 1^st April, 2001.

b. Holding Period of Capital Assets

In order to determine whether the gain arising on the transfer of a capital asset, is a long term capital gain or a short term capital gain, the holding period of the capital asset is a key factor. Gains arising from the transfer of listed shares, units of equity oriented mutual funds and zero-coupon bonds shall be considered as long term if the period of holding such assets is more than 12 months. Further in case of unlisted shares and immovable property (land and building) the period of holding has been reduced to 24 months from 36 months. For the remaining capital assets, the period of holding continues to be 36 months.

c. Section 50CA

A new section, Sec 50CA was introduced by Finance Act, 2017. This section deals with the transfer of unlisted shares and provides that consideration for transfer of such shares shall be deemed to be the fair market value calculated by a Merchant Banker or a Chartered Accountant as on the valuation date if the transfer price is less than its FMV.

6. PENALTY FOR LATE FILING OF RETURNS

The Finance Act, 2017 introduced a new fee under section 234F if the taxpayer did not furnish the return of income on or before the due dates prescribed under Section 139(1). The fees shall be levied as under:

a. INR 5,000 if return is furnished after the due date but before December 31 of the assessment year [INR 1,000 if total income is up to INR 5 lakhs].

b. INR 10,000, in any other case.

Care must be taken to ensure that wherever applicable, this fee is paid before filing the return. The new ITR forms contain fields for inputting the amount of fee paid u/s 234F.

7. TAX DEDUCTED AS SOURCE AND ADVANCE TAX

a. Individuals and HUF (apart from those subject to tax audit) paying rent to a resident exceeding INR 50,000 per month are required to deduct TDS at the rate of 5%. This amendment was put into effect from 1^stJune, 2017 as per section 194-IB. Care must be taken to ensure that any TDS appearing in the tax payer’s 26AS against this section is also taken into consideration while computing the income and tax payable/refundable.

b. The advantage of paying advance tax on or before 15^thMarch by way of one installment instead of four instalments has been extended to professionals declaring profits and gains in accordance with presumptive taxation regime. This may be taken into consideration while computing interest, if any, u/s. 234B / 234C. 

8. INCOME FROM OTHER SOURCES – GIFT

Finance Act, 2017 has widened the scope of provisions dealing with the taxability of gifts. A new clause (x) was inserted in Sec 56(2) whereby any sum or property received without any consideration or inadequate consideration (in excess of INR 50,000) shall be taxable as ‘Income from other sources’. This clause is applicable to all taxpayers. Earlier this provision was applicable only to an Individual and HUF.

9. ITR FORMS

a. Taxpayers earning Income from Salary and Income from House Property are required to furnish break up of amounts as against only the final taxable figures as per ITR forms for the previous A.Y. They are expected to report particulars with respect to value of perquisites, profit in the lieu of salary, taxable allowances and deductions u/s 16 in case of Income from Salary and the gross rent, tax paid to local authorities, interest payable on borrowed capital in case of Income from House Property. Consequently, additional rows have been added in order to report the above figures.

b. Non-Residents would have an option to furnish details of any one foreign bank account for the purpose of claiming income-tax refund. Earlier they were allowed to provide details pertaining to bank accounts in India only.

c. Assessee’s eligible to claim DTAA relief under Capital Gains and Income from Other Sources shall be required to furnish the following details:

d. Rate as per treaty

e. Rate as per Income tax

f. Section of the Income-tax Act

g. Applicable rate [lower of (a) or (b)]

10. SELECTING THE CORRECT ITR FORM

The most important point to be kept in mind while filing the return of income is to file the correct ITR form. The CBDT recently notified the ITR forms for A.Y 2018-19. The taxpyers should select and file the form depending upon the sources from which they derive income. The various ITR forms and the taxpayers to which they apply have been listed below. It may be noted that ITR 4 is no longer in force for A.Y. 2018-19.: