10 things you need to keep in mind while making your tax declarations

The start of the financial year means that it is that time of the year where every employee has to giving their investment declarations for the year to their employer. Based on this declaration the employer will deduct the tax from the salary every month. Here are 10 new rules applicable from the current financial year 2017-18 that you would need to keep in mind, according to a Business Today report.

1. The government has reduced tax rate from 10% to 5% for income between Rs 2.5 lakh to Rs 5 lakh. This will result in a tax benefit of Rs 12,500 for taxpayers. In addition if you add 2% education cess and 1% secondary education cess, the tax savings will increase to Rs 12,875.

2. The tax rebate given to taxpayers under Section 87A has now been reduced from Rs 5,000 to Rs 2,500. While earlier it was available to only those with a taxable income of Rs 5 lakh, now the limit has been reduced to Rs 3.5 lakh.

3. The tax break on Rajiv Gandhi Equity Savings Scheme available for first time investors will now not be available from this year.

4. The holding period for computation of long term gains in case of property has been reduced from three years to two years.

5. If a property has been let out, the set-off of loss from house property from income streams has been limited to Rs 2 lakh for the financial year, from no cap on the limit earlier. If there was a loss from house property as the entire interest of the home loan for a let out property was tax deductible, you could set off the entire loss against any other source of income. This would hence reduce the tax burden substantially. However, now you can set off losses of only up to Rs 2 lakh and you can carry forward the loss for the next 8 years. However, as the initial years of interest is high the tax savings will reduce substantially due to the Rs 2 lakh cap.

6. Partial withdrawals from National Pension Scheme (NPS) up to 25% of the contribution made by an employee has been made tax free. Besides this, self-employed individuals will now be eligible to claim deductions up to 20% of their gross total income. This is against the earlier 10% of the contribution made to NPS. The overall deduction limit would be Rs 1.5 lakh.

7. Taxpayers who are eligible to file tax returns but fail to do so before the deadline of July 31 will face a higher penalty. The tax penalty will be of Rs 5,000 that will be levied if the returns are filed after July 31 and Rs 10,000 if it is filed after December 31. However, for smaller taxpayers with income not exceeding Rs 5 lakh the penalty will be Rs 1,000.

8. The time period for revising tax returns has been reduced to 12 months from the completion of the financial year. The time frame for scrutiny assessments has been reduced from 21 months to 18 months for the next financial year. It is expected to be reduced further to 12 months from 2018-19.

9. The base year for indexation has been shifted from April 1, 1981 to April 1, 2001. The shift in the base year will mean less tax liability for a buyer. Indexation means adjusting the impact of inflation during the holding period of the capital asset so that it reflects the current market prices.

10. It is now mandatory for those claiming a House Rent Allowance (HRA) of more than Rs 50,000 per month to deduct tax at source at the rate of 5%. The TDS will have to be deducted on the last month of the year in which rent is paid or the last month of tenancy. In case the landlord does not have a PAN card, the tax deduction shall not exceed the amount of rent payable for the last month of the previous year, or the last month of tenancy.