“Transform, Energise and Clean India” — with this overreaching agenda, the Finance Minister pronounced the Union Budget today. Let us look at some of the key personal tax proposals:

Change in the tax slab rates It is proposed to reduce the existing tax rate of 10 per cent to 5 per cent for income of ₹5 lakh or below. However, there is no change in the existing non-taxable threshold of ₹2.5 lakh. The change would reduce the tax liability of all those with income below ₹5 lakh either to zero (with rebate) or 50 per cent of existing liability.

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There is no change in the tax rate for other slabs. While the tax liability of a taxpayer with income up to ₹5 lakh is being halved, all other categories of taxpayers in the subsequent slabs will also get a uniform benefit of ₹12,875 (including education cess). Further, a surcharge of 10 per cent is proposed for taxpayers whose taxable income is between ₹50 lakh and ₹1 crore. However, 15 per cent surcharge on income above ₹1 crore will continue.

The Finance Minister proposed to reduce the holding period for immovable property from the existing three years to two to qualify as long-term capital asset. Also, in order to revise the base year for computation of capital gains, it is proposed to consider the cost of acquisition of an asset as of April 1, 2001, if an asset was acquired before that date. However, the cost of improvement shall include only those capital expenses which are incurred after April 1, 2001.

Further, it is proposed to amend section 54EC of the Income Tax Act, 1961, to ensure that investment in any bond redeemable after three years that has been notified by the Central government shall also be eligible for exemption. Currently, investment in bond issued by the National Highways Authority of India or the Rural Electrification Corporation Ltd is eligible for exemption under this section.

Anti-abuse measures Under Section 10(38) of the Act, income arising from a transfer of long-term capital asset, being equity share of a company or a unit of an equity-oriented fund, is exempt from tax if the sale is done post October 1, 2014 and is chargeable to Securities Transaction Tax. It has been noticed that this exemption is being misused to declare unaccounted income as exempted long-term capital gains.

To prevent this abuse, an amendment is proposed that the exemption shall be available only if the acquisition of share is also chargeable to Securities Transaction Tax under the Act.

Rationalisation measures To address the existing anomaly of interest deduction with respect to let-out property vis-à-vis self-occupied property, it is proposed to restrict set-off of loss from house property against any other income during the current year to ₹2 lakh only. The loss not set-off would be allowed to be carried forward for set-off against house property income in subsequent years.

The writer is Tax Partner, EY India. With inputs from Sreenivasulu Reddy, Senior Tax Professional at EY. The views are personal

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