OIL AND NATURAL GAS CORPORATION LTD. CORPORATE TAX DIVISION OLD SECRETARIAT BUILDING TEL BHAVAN, DEHRADUN ‘Tele No. 2793831, Fax No.0135-2758518 ‘No.: CTD/Cire/TDS-Salaries-17-18 /2017-18/02 Dated: 11-04-2017 CIRCULAR ‘Sub: Changes made by the Finance Act 2017, affecting taxation of employees, ‘The Finance Act, 2017, has made a few changes in the provisions of Income-tax Act, 1961 (Act), which affect the taxability of employees (including ex-employees) for and from the financi (FY) 2017-18 in respect of their income from salaries and the deductions usually adi them. These changes are summarized below. 1. Rates of Tax, Surcharge & Edueation Cess (a) Amendment in the Rate of Income-tax ‘The rate of income-tax applicable in the first slab of income i. but not exceeding ® 5 Lakh, has been reduced from 10% to 5%. [After the above amendment, the tax slabs applicable to individuals (who are tax resident in India) and the rates applicable thereon are as under:- income exceeding € 2.5 Lakh Taxable Income (Rs.) Tax Rates ] For Individuals | For individuals born | For individuals born bor after 01-04- | after 01-04-1938 | on or before 01-04- 1958 but on or before 01- | 1938 04-1958 Upto 2,50,000 Nil Nil Nil 72,50,000 to 3,00,000 3% Nil Nil 3,00,000 to 5,00,000 3% 3% Nil 5,00,000 to 10,00,000 20% 20% 20% ‘Above 10,00,000 30% 30% | 30% (>) Applicabiti rehat ‘The threshold of taxable income for applicability of surcharge has been reduced from @ 1 crore to % 50 lakh. From FY 2017-18, in cases where income exceeds % 50 lakh but does not exceed @ 1 crore, surcharge would be applicable @ 10% of income-tax. Earlier no surcharge was applicable in such cases, Surcharge at the existing rate of 15% of income-tax would continue to apply in cases where income exceeds € 1 crore. Thus, income-tax calculated at the aforesaid rates would have to be increased by a surcharge applicable as follows:~ Taxable Income (®) Rate of surcharge (on income-tax) Upto 50 lakh Nil 30 lakh to 1 crore | 10% ‘Above I crore 15%There is no change in the rates of Education Cess and Secondary & Higher Education Cess (jointly referred to as education cess and whose rate continues to be 3%). Thus, the total amount of income-tax and surcharge (if applicable) would have to be increased by education cess @ 3% on income-tax and surcharge (if applicable) in al the cases irrespective of the income of the individual. 2. Reduction in Income Threshold and amount of Tax Rebate w/s. 874 As per the pre-amended section 87A of the Act, a resident individual whose taxable income during the financial year did not exceed @ 5 Lakh, was allowed a rebate of & 5,000 or 100% of his tax liability, whichever was less, from the amount of tax payable by him. ‘The Finance Act, 2017, has reduced the ceiling amount of rebate w/s. 87 from ¥ 5,000 to % 2,500. The income threshold for availability of the aforesaid rebate has also been lowered from % 5 lakh to @ 3.5 lakh. Thus, rebate ws. 87A upto & 2,500 or 100% of tax liability, whichever is less, is now available to resident individual whose income during the financial year does not exceed & 3.5 lakh. 3. Restriction on Set-off of Loss from House Property Earlier, loss from house property was allowed to be set off against income under any other head of income (without any limit). The Finance Act, 2017, has introduced a ceiling of & 2 lakh for such inter- head adjustment of loss from house property. Thus, loss from house property for a financial year can now be set off against any other income, including salary income, only upto a maximum of 2 lakh. However, where the loss from house property during a financial year exceeds 2 lakh and, hence, the same is not wholly set off against any other income for that year, such excess loss can be carried forward to succeeding years (not being more than eight years immediately following the year for which the loss was first computed) for being set off ‘against income from house property for the subsequent year. 4. Other Significant Amendments affecting taxation of an Individual (a) Exemption on Partial Withdrawal from National Pension System Section 10(12A) provides that payment from National Pension System (NPS) Trust to an employee on closure of his account or opting out shall be exempt up to 40% of total amount payable to him. ‘The Finance Act, 2017 has broadened the scope of exemption in this regard by inserting section 10 (12B) of the Act which provides exemption to partial withdrawal from NPS not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made thereunder. ‘Thus, subject to fulfillment of thé aforesaid terms and conditions, if an employee makes a partial withdrawal from his NPS account (otherwise than on closure of his account or opting out of scheme), the amount so withdrawn shall be exempt in the hands of employee up to 25% of total contributions made by such employee, (b) Applicability of TDS ws. 194-1B on rental payments by individuals Section 194-1 of the Act witich deals with TDS on rental payments is applicable only to such individuals who are liable for tax audit ws. 44AB of the Act, ‘The Finance Act, 2017, has inserted section 194-IB whereby the scope for applicability of TDS on rental payments has been extended to the remaining individuals also in certain circumstances. As per the provisions of section 194-IB, an individual (other than an individual subject to tax audit w/s. 44AB of the Act) paying rent exceeding & 50 thousand per month or part of the month is required to deduct TDS thereon @ 5%. TDS ws. 194-IB shall be deducted only once in a financial year at the time of credit of rent for the last month of the relevant financial year or the last month of tenancy where 2|3the property is vacated during the financial year, to the account of the payee or at the time of payment thereof, whichever is earlier. The deductor need not obtain a Tax Deduction and Collection Account ‘Number (TAN) for the purpose and can deposit the tax by quoting his PAN. It has been provided that, if owing to non-availability of PAN of deductee (ie. the landlord), TDS is required to be deducted at the higher rate of 20% under section 206AA of the Act, the amount of TDS shall not exceed the rent payable for the last month of the financial year or, as the case may be, last ‘month of tenancy. S. This circular has been compiled by Corporate Tax Division for basic guidance of the concerned persons. Only highlights of significant amendments have been brought out hereinabove and this circular does not purport to be an exhaustive document covering all facets of deduction of tax at source from salaries. The concerned persons are, therefore, requested to consult the relevant Acts, Rules, Notifications, Circulars, etc., including the detailed circular issued by Central Board of Direct Taxes every year in regard to TDS from salaries, and to exercise all due care and caution while effecting deduction and deposit of tax at source. (Anupam Agarwal) \V 4}? DGM-Head, Corporate Tax Distribution: All concerned through ONGCReporis.net. Hard copies are not being circulated. Copies for kind information to: 1. Director (Finance), ONGC, New Del 2. Director (Finance), OVL, New Delhi 3. Director (Finance), MRPL, New Delhi. 4, ED-CCF, ONGC, New Delhi.