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Financial Planning

Finance Bill: What you should know about it and how it will affect you

23 April 2017
As amendments to the Finance Bill have been put into effect since 1 April 2017, find out how it will impact you.
 

The Lok Sabha passed the Finance Bill on 22 March, after making 40 amendments to the original bill. It then went to the Rajya Sabha, which made five amendments. However, the objections raised were disregarded by the Lok Sabha, and as this is a money bill, the Rajya Sabha’s approval is not required. The bill finally reached the President, who approved it and put it into effect from 1 April 2017 onwards.

Usually, the Finance Bill gets implemented only from 1 July every year. This is because the Budget used to take place only on the last working day of February. This year, however, the government decided to table the Budget earlier, in the first week of February 2017. This helped expedite the process and get the Finance Bill implemented by 1 April 2017.

And until the last moment, there were changes and amendments.

Related: Most important income tax changes from 1st April 2017

So, what do the amendments mean for the common man?

1) Aadhaar is mandatory

The new bill is set to make India tax-efficient. It plans to do this by making Aadhaar mandatory for filing income tax returns (ITR). Aadhaar will also be necessary to apply for a PAN card. The move is aimed at eliminating the possibility of tax evasion by individuals who hold several PAN cards at a time. As Aadhaar cards are linked with individual biometrics, each person can have only one card, thus curbing tax evasion.

However, the Supreme Court has questioned the judgement on making it compulsory. A hearing regarding the same is scheduled to be held on Tuesday, 25 April. Additionally, experts have fears as well. Those without Aadhaar cards or who have not enrolled for it might stay out of the tax net. Such people may have to face the taxman for no fault of their own.

2) A further boost to the digital economy

The finance bill, presented on the day of the budget, proposed a limit on cash transactions. Initially, the limit was set at Rs. 3 lakhs per transaction. There was to be a penalty of 100% for transactions above this limit. But the amended bill reduced this limit to Rs. 2 lakhs per transaction. The government is yet to decide the penalty.

Such a move may curb the circulation of black money in the economy. By encouraging cashless transactions, it could take India closer to becoming a digital economy.

3) More income tax (IT) raids

The amendments to the bill have enhanced the powers of income tax authorities. IT officials will now be able to raid any property, and seize the raided property for six months. Additionally, they will not have to provide any justification for doing so. This move could address corruption. But experts have a word of warning; they believe it could mean unnecessary harassment for innocent taxpayers.

4) Political funding

The amended bill also affects donations to political parties. For instance, contributions to political parties must go through certain channels. Donations can be made through cheque, bank draft, or electronic means. There may be other government-notified schemes, too. The goal is to encourage transparency.

How much companies can donate to political parties, has also changed.

  • Before, a company could contribute only up to 7.5% (on average) of its net profits in the last three financial years.
  • It also had to disclose the donation amount, and had to name the receiving party.
  • From 1 April 2017, however, a company can make such donations without any limit.
  • It also does not have to follow any disclosure norms. This means companies can pay any amount to political parties.

Related: With GST ready to roll out this July, what does it mean for you?

5) Merging of the tribunals

The amended bill provides for the merging of several administrative tribunals. The government will now also decide the appointment or removal of their officials. This may affect the independence of tribunals, or create a conflict of interest where the government is party to a dispute.

6) Quick recap of Budget 2017

Taxpayers in the Rs. 2.5–5 lakhs slab heaved a sigh of relief, as the tax rate for them was reduced to 5% from 10%. It also reduced the tax liability of people falling in higher slabs, allowing them to save Rs. 12,500. Additionally, the ITR filing process for those with a taxable income of up to Rs. 5 lakhs, has also been simplified. So, the budget brought good news for people with a lower income. But it burdened high-income taxpayers with an extra surcharge. This was 10% or 15% depending on their income.

The bottom line

While the budget, which was announced on 1 February 2017, gave most people a reason to cheer, many do not approve of the amendments. Several analysts and experts have pointed out the loopholes in the Finance Bill. Only time will tell how well this will work out for the people.

 
 
 

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