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Finance Minister Arun Jaitley has made a number of changes in income tax over the last two years. To understand how Monday’s budget could impact your tax liability, you should have an understanding of current income tax slabs and tax benefits rolled out in the past two budgets. www.taxxcel.com
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Finance Minister Arun Jaitley announced three new measures to provide relief to small taxpayers in Budget 2016.
1) Mr Jaitley raised the deduction limit under Section 87A of the Income Tax Act from
Finance Minister Arun Jaitley did not change income tax slabs in his third Budget, but he did tweak some deductions and announced multiple new cesses, which will impact tax liability for the common man.www.taxxcel.com
Here is a complete list of new tax measures announced in Budget 2016:
Direct Tax:
1) Deduction limit under Section 87A of the Income Tax Act has been raised from
In the
While making no change in personal Income Tax slabs in the Union Budget 2016-17, Finance Minister Arun Jaitley
Finance Minister Arun Jaitley will focus on three to four broad themes in this year’s budget, says Mukesh Butani, managing partner at BMR Legal. Tax benefit to deal with inflation, rejigging of threshold and slab rates and tax relief on interest earned from bank deposits could be announced in budget, he added.
“There could be some form of incentive for garnering greater degree of deposits in the banking sector. He (Jaitley) could raise the limit on interest deduction on interest from bank is concerned,” Mr Butani told NDTV Profit. (Watch)
According to the current tax laws, if the total interest on bank deposits in a financial year crosses the threshold limit of
There is a silly season and there is a budget season. Or there could be two silly seasons – one when news has dried up and a second when everyone and their uncle has a point of view on what the Finance Minister should do in the budget.www.taxxcel.com
The Finance Minister encourages these views by calling many august people to long meetings seeking the distinguished members’ thoughts. This time, Arun Jaitley has also asked the aam aadmi to tweet suggestions. So from industrialists to economists to reps of state governments, a long line of visitors all arrive in New Delhi to tell the Finance Minister how he can design a better budget – especially for them.
What nobody wants to discuss is that there is very little money available to any government to put to productive use.
This graphic (source: Budget 2015-16) of what happens to the rupee clearly demonstrates that only 11% of the budget is available for the Central Plan (or real development spending), which is
Total collection from direct taxes stood at Rs 5.47 lakh crore as on February 13, which is 68.7% of the budget target for the fiscal.
“Net (direct tax) collection was Rs 5.47 lakh crore as on February 13, 2016. This amount is 68.7% of the target of Rs 7.96 lakh crore,” Central Board of Direct Taxes (CBDT) member Surabhi Sinha has said.
Direct taxes include personal Income Tax and corporate taxes. The government anticipates a shortfall of about Rs 40,000 crore from direct tax collection in the current fiscal.
However, the shortfall would be made good as the indirect tax revenues are likely to overshoot budget targets by a similar margin. Of the Rs 14.5 lakh crore tax revenue target, Rs 7.96 lakh crore was estimated to come from direct taxes (corporate and income tax) and another Rs 6.5 lakh crore from indirect taxes (customs, excise and service tax).
Income tax laws allow you various benefits in respect of amounts spent or invested. Primarily these tax benefits are available for amounts spent or invested on yourself but for certain items, the benefits are available for amounts invested or spent on family members. Let us discuss. www.taxxcel.com
Benefits available for parents –
Section 80 D allows you an exclusive deduction of Rs. 25,000 paid for health insurance premium for your parents whether financially dependent or no. In case they have completed 60 years of age, the deduction available goes to Rs. 30,000 in a year. Within this limit of Rs. 25,000/-, the law allows you a deduction of Rs. 5,000 per year for amounts spent on regular health check up. Please note that the law does not allow you any deduction in respect of life insurance premium for your parents even if they are dependent.
Deductions is also available under Section 80DD for expenses incurred on medical treatment of your dependent parents with specified physical disability or for buying a life insurance policy for maintenance of such dependent parents. The deduction available is up to Rs. 75,000 and goes up to Rs. 1,25,000 in case the parent is suffering from severe disabilities. This deduction can also be claimed for siblings, children, or spouse in case they are suffering with such disease. In addition to above deduction a further deduction under Section 80 DDB is also allowed up to Rs. 40,000 for expenses incurred for treatment of any of the family persons including your parents suffering from some acute specified diseases. However this deduction goes up to Rs. 80,000 in case the expenses incurred is in respect of a patient who is a senior citizen. Any reimbursement received up to Rs. 15,000 from your employer for medical expenditure incurred on your parents, siblings, spouse, yourself and children is also exempt.
The income tax laws also allow you the tax benefit in respect of LTA (Leave Travel Assistance) received from your employer and spent by for your financially dependent parents towards travel expenses incurred on holidays with you in India.
Benefits available for siblings–
The benefits of LTA and deduction under Section 80 DD and 80 DDB is also available for your siblings, children, and spouse who are financially dependent on you. The law does not envisage any tax benefits for your siblings under Section 80 C be it insurance premium or school fee or even any investment. Even the benefit of interest on education loan is not available in respect of your siblings.
Benefits available for spouse-
You can claim tax benefits in respect of LTA for your travel with your spouse anywhere in India even if the spouse is financially independent. In case the spouse is also in receipt of LTA, the couple can claim it for holidaying every year as both of you can claim this in alternate year. You can also claim the tax benefits in respect of medical insurance premium paid for yourself as well as your children up to Rs. 25,000.
You can also take the tax benefits for life insurance premium paid for your spouse as well as for any amount deposited in the PPF account for your spouse. You can avail the tax benefits in respect of interest paid on education for higher studies of your spouse in addition to yourself and your children.
Benefits for children-
For your children you can claim various tax benefits. You can claim the benefits for life insurance premium paid on the life of your children whether dependent or not but for claiming the benefits for medical insurance premium within the overall limit of Rs. 25,000 your children should be financially dependent on you. You can also claim the benefits for school fee as well as for interest on education loan. The benefit of contribution to public provident fund account of your children can be claimed even if they are independent.
Please note that the benefits of national saving certificates and equity linked saving certificates are available only to the tax payer and not anyone else.
From the above discussion, it is clear that the legislators have not provided for the tax benefits consistently for expenses incurred in respect of your family members.
Industry body Assocham has asked the government to increase the personal income tax exemption limit in budget to