Know Your Income Tax Slab Ahead Of Budget Today

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

Know Your Income Tax Slab Ahead of Budget Today

1) Income of up to Rs. 2.5 lakh is fully exempt from tax in case of an individual of less than 60 years of age.

2) For taxable income between Rs. 2.5 lakh and up to Rs. 5 lakh, income tax is applicable at the rate of 10 per cent.

3) If taxable income is above Rs. 5 lakh but less than Rs. 10 lakh, income tax is 20 per cent.

4) Income above Rs. 10 lakh is taxed at the rate of 30 per cent.

5) Super-rich individuals with an annual taxable income of over Rs. 1 crore will have to pay surcharge of 12 per cent.

6) Tax payers can claim deduction of up to Rs. 1.50 lakh under Section 80C. Instruments that qualify under Section 80 C include public provident fund, employees provident fund, tax-saving mutual funds, 5-year fixed deposits.

7) In case of self-occupied house, a deduction of up to Rs. 2 lakh on account of interest on house property loan can be claimed.

8) An additional deduction of Rs. 50,000 is allowed for contribution made towards National Pension System under Section 80CCD. This is over and above Rs. 1.5 lakh deduction available under Section 80C.

9) A deduction of Rs. 25,000 is allowed for health insurance premium.

10) An exemption of Rs. 19,200 per year (Rs. 1,600 per month) can be claimed against transport allowance.

Budget 2016: Income Tax Relief Announced For Small Taxpayers

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 Rs. 2,000 to Rs. 5,000 per annum. Under Section 87A, taxpayers first reduce Rs. 2,000 from their total tax payable. This section applies to those with total income of less than Rs. 5 lakh.

Mr Jaitley said the move will help more than 2 crore taxpayers.

2) The finance minister also announced relief for taxpayers who do not own a house and don’t get house rent allowance from employers. So far, such taxpayers got a relief of Rs.24,000 per year, which has now been raised to Rs. 60,000 per annum under Section 80GG, Mr Jaitley said. The measure will provide “relief to those in rented houses,” the finance minister added.www.taxxcel.com

3) Mr Jaitley also announced an additional deduction of Rs.50,000 on interest paid by first-time home buyers on home loans of up to Rs. 35 lakh, provided the house value doesn’t exceed Rs. 50 lakh.

However, super-rich (those with an income of over Rs. 1 crore) will have to pay more taxes as surcharge has been raised from 12 per cent to 15 per cent.

10 Big Tax-Related Announcements In Budget 2016

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

10 Big Tax-Related Announcements in Budget 2016

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 Rs. 2,000 to Rs. 5,000 per annum. This will help over 2 crore taxpayers save more.

2) Taxpayers who live in rented houses and don’t get house rent allowance (HRA) can deduct Rs. 60,000 per annum from their income from the current Rs. 24,000.

3) An additional deduction of Rs. 50,000 on interest paid by first-time home buyers on home loans of up to Rs. 35 lakh, provided the house value doesn’t exceed Rs. 50 lakh, has been announced.

4) Super-rich, or those with an income of over Rs. 1 crore, will have to pay more taxes as surcharge has been raised from 12 per cent to 15 per cent.

5) Individuals who receive dividends in excess of Rs. 10 lakh per annum will now have to pay 10 per cent tax on gross amount of dividend.

Indirect Tax:

6) Cars priced Rs. 10 lakh and above will attract 1 per cent tax. Purchase of goods and services in cash exceeding Rs. 2 lakh will also attract 1 per cent tax. An infrastructure cess of 1 per cent on small petrol, LPG and CNG cars, 2.5 per cent on diesel cars of certain capacity, and 4 per cent on SUVs will make buying all cars costlier.

7) Eating out in restaurants, buying property and insurance, and making mobile phone calls will become more expensive from June 1, 2016 because of a “Krishi Kalyan” cess of 0.5 per cent, which will be levied on all services.

8) Cigarette prices will go from next financial year as excise duty on tobacco products (other than beedi) has been hiked from 10 per cent to 15 per cent.

9) Single-premium insurance premiums will get cheaper as service tax on policy premiums has been cut from 3.5 per cent to 1.4 per cent.

10) Branded retail garments will become costlier as Budget 2016 has proposed a 6 per cent excise on branded retail garments priced more than Rs. 1,000. 10) Imitation jewellery is also set to cost more as basic customs duty has been increased from 10 per cent to 15 per cent.

Budget 2016: Tax rebate for persons with income less than or equal to Rs 5 lakh increased by Rs 3000

In the budget 2016, the finance minister has increased the tax rebate given to individuals with net income equal to or less than Rs 5 lakh under section 87A from Rs 2000 to Rs 5000. Currently, under this section a resident individual with income up to or equal to Rs 5 lakh can get a rebate in tax equal to 100 per cent of the income tax payable or Rs 2000 whichever is less. This low cap of Rs 2000 has now been increased to Rs 5000. This is expected to provide a relief of Rs 3000 in tax to over 2 crore tax payers, according to the finance minister.www.taxxcel.com

FM has increased the tax rebate given to individuals with net income equal to or less than Rs 5 lakh under section 87A from Rs 2000 to Rs 5000.

In the budget 2016, the finance minister has also increased the surcharge on income tax levied on individuals earning income of Rs 1 crore or more from 12 % at present to 15%. This move is aimed at taxing the super rich

Currently, for HUFs and a resident individual below 60 years of age, income up to Rs 2,50,000 is exempt from tax, income from Rs 250,001 to Rs 5,00,000 is taxed at 10%, from Rs 5,00,001 to Rs 10,00,000 at 20% and above Rs 10 lakh at 30%. A total cess of 3% of the income tax payable is also levied. On income above Rs 1 crore a surcharge of 12% of income tax is additionally levied on the income tax computed and then the 3% cess is further levied on the total of tax plus surcharge

Union Budget 2016-17 Live Updates: No change in Income Tax slabs, rent relief increased to Rs 60,000

While making no change in personal Income Tax slabs in the Union Budget 2016-17, Finance Minister Arun Jaitley on Monday announced deduction for additional interests of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17 for first time home buyers, where house costs does not exceed Rs 50 lakh.

Jaitley also proposed to increase the limit of deduction of rent paid from Rs 24,000 per annum to Rs 60,000 spelling respite to those who don’t own any house and live in rented accommodation.

For those earning less than Rs 5 lakh per annum,  FM announced to raise the ceiling of tax rebate from Rs 2000 to Rs 5000 giving an additional relief of Rs 3000 in their tax liability.

Stay tuned as we bring you live updates from the Budget.

Expecting Income Tax Incentives On Bank Deposits

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 Rs.10,000, tax deducted at source (TDS) is applied on the interest earned.

In the previous year’s budget, Mr Jaitley had announced the government’s intention to reduce corporate tax from 30 per cent to 25 per cent over the next four years. Mr Butani expects the finance minister to outline a roadmap for lowering of corporate tax rate.

“The primary agenda would be how the corporate tax rate would be lowered over the next 4 years, including the phase-out programs for various exemptions.” www.taxxcel.com

Indirect tax

Mr Butani expects the finance minister to announce some changes in the indirect tax regime to usher in GST (goods and services tax).

“In the light of Parliament logjam on GST, people would be wondering what is the finance minister is going to do as far as GST is concerned. Taking away of the central sales tax (CST) will be important signal for the GST,” he said. “The government is well within its realm to carry out the requisite amendments for indirect tax central sales tax levies for seamless credits. That will ease pressure and signal that the central part of GST is concerned, at least seamless credits are available.”

CST is levied on goods in inter-state trade. Under the proposed GST regime, major central and state taxes will get subsumed into GST to bring in a uniform tax regime across the country. In anticipation of implementation of GST, the central sales tax goods was brought down from 4 per cent to 2 per cent in two phases in 2007-2009 but this tax has not yet been fully phased out yet.

Mr Butani also expects the government to address the inverted duty structure issue in some sectors. Under the inverted duty structure, the import duty on the raw material is more than the import duty on the same finished product, a taxation structure the hurts the competitiveness of domestic manufacturing industry.

“You could also very well see, the continuing efforts of successive governments, including this government, to address the inverted duty structure in certain industries in which it is still around,” he said.

Mr Bhutani also expects the finance minister to announce administrative tax reforms to increase the ease of doing business in India and also defer the general anti-avoidance rule (GAAR) for another year

Sorry, Budget 2016 Won’t Be About The Middle Class Tax Payer

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 Rs. 46,000 crore. The bulk of the rest of the money is drained away by interest payments (20%), subsidies (10%) defence salaries, other salaries, pensions etc. What this graphic hides is the fact that these percentages taken are on the total amount that the government spends, and not what it earns. The central collection of taxes etc only amounts to two thirds of the money it spends. The rest is borrowed.

The heart of the problem is that the government’s tax collection system is weak, and Indians are amongst the biggest tax cheats in the world. Currently, only 3% of Indians pay income tax. This is largely because income from agriculture cannot be taxed by the Central Government. So farmers don’t come into the tax net. In reality, most of the rural population manages to stay out of the tax net.

But farmers aren’t the only people who escape paying taxes. Many people under report income. So, unless you are a salaried person, in which case you get hit by the full force of taxes, you can probably fiddle the amount you earn. Which is true of most professionals, shopkeepers and businessmen. How else do you explain the difference between what the government reports and the banks’ estimate of the super-rich in India? The government says only 50,000 people declare and income of more than Rs. 1 crore. The wealth reports estimate that the Very High Net Income families in India number about 1.75 lakhs to 2.50 lakhs. That’s upto FIVE times the number that declare the Rs. 1 crore-plus income. So yes, cheating on taxes is true of the rich, but as the report below shows, you can bet under-reporting on income is rampant in all classes of people.

What this shows is in a country of 1.2 billion people, 39 lakh people (about one fourth of Delhi’s population) pay NINETY percent of all income tax. So, either India isn’t shining, or a lot of people fudge their income.

But tax cheating does not mean just not paying taxes, it also means paying less tax than you owe because you don’t show much of your income. After all, the cash you pay your doctor, lawyer and chartered accountant often does not find its way on to their books. Cash paid at shops or the “estimate” instead of the bill that the shopkeeper gives you is humbug – the money is not accounted for. Contractors of all kinds avoid taxes like the plague. All these worthies are part of the problem of a low tax yield.

So yes, the government doesn’t get its dues. The other problem is on government spending: the Holy Cows of Subsidies. Between food, fertilizer and petroleum products, a lot of money is ostensibly spent keeping the poor from deprivation. Unfortunately, much of this never reaches the real poor and is siphoned. But no government has the courage to remove these welfare schemes. The potential political fallout is too high a risk to pay in country where every year, some state or the other goes to the polls. Efforts have begun to rationalize these, as with LPG through direct transfer (the subsidy lands straight in the account of the beneficiary), and this is an area that could see more progress; the government is considering means of direct transfer for food subsidy or fertilizer.

Prime Minister Modi has already done a U-turn to now endorse MGNREGA (the rural employment scheme brought in by the Congress government); with the continuing drought in much of the country and the recent announcement of crop insurance, rural spends aren’t likely to come down. The fact that three major states going to the polls in April (followed by UP next year) portends more giveaways on February 29 to farmers.

In fact, the big debate is whether the government should increase spending by borrowing more, or remain fiscally prudent. On one side, the RBI Governor Raghuram Rajan, Niti Aayog chief Arvind Panagariya and others have warned the government against over-spending and breaking its targeted fiscal barriers. On the other hand, Chief Economic Advisor, Arvind Subramanian and others have argued that the government should not worry about spending more as it is only this which will give a kick start to the economy.

Luckily for Mr Jaitley, crude prices are likely to remain low, so you can assume that the taxes on petroleum (currently 33% of the price is excise duty), which have kept prices high, will continue or may even go up.

Service tax under the cloak of rationalizing it for GST will go up again from 14.5% to at least 16%. That means you probably will pay more at restaurants, beauty salons, and for utilities.

The average taxpayer is hoping for some relief in terms of increasing the exemption level and larger deductions for medical insurance and interest on house loans. An effort to this effect may be done as a populist measure as it really does not cost the government that much to absorb the costs of those concessions.

So while everyone wants to chat about what the Budget will bring, assume that it will firstly address the large voting public of this country.

There may be a few tidbits for the middle class, but with the government already having started the implementation of One Rank One Pension for defence personnel, and with a mammoth hike due in the wage bill for central government employees, plus meeting the Government’s rural concerns, if you’re a salaried person, don’t expect too much.

Rs 5.37 lakh crore direct tax collected till February 13, reaches 68.7% of budget target

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.

www.taxxcel.com

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 benefits: for whom can you claim

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

Income tax benefits:  for whom can you claim

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. 

Raise Income Tax Exemption Limit to Rs. 4 Lakh: Assocham

Industry body Assocham has asked the government to increase the personal income tax exemption limit in budget to Rs. 4 lakh from Rs. 2.5 lakh for all individual taxpayers. The industry body also demanded additional incentives for savings and higher tax allowance for expenditure on education and health, quoting findings from its survey.

“Over 87 per cent respondents in the poll said increasing the basic tax exemption limit from the present Rs. 2.5 lakh to Rs. 4 lakh should be the minimum that the Finance Minister should announce in the 2016-17 budget,” Assocham stated.www.taxxcel.com

The industry chamber also recommended a hike in personal IT exemption limit to Rs. 4 lakh in its pre-budget memorandum. “The higher exemption limit was necessitated by increasing cost of living, particularly with regard to health, education and transport,” it added.

Besides, noting that the amount of medical expenses reimbursed by the employer on treatment of employees or their family members is exempt from tax to the extent of Rs.15,000 per annum, 88 per cent of the respondents advocated hiking the limit to Rs. 50,000 per annum as the present threshold was set way back in 1998.

Similarly, deduction of Rs. 15,000 under section 80D for payment of medical insurance premium was set in the year 2008. In order to encourage and bring more people under the health insurance umbrella, the deduction should be increased to Rs. 50,000, said majority of the respondents.

The poll was conducted in cities like Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabad, Pune, Chandigarh, Dehradun etc. About 500 employees from different sectors were covered by the survey from each city on an average.

Majority of respondents said leave encashment exemption limit for tax calculation should be raised to Rs. 10 lakh as the current limit of Rs. 3 lakh was notified by the CBDT way back in 1998.

Also the children education allowance exemption limit should increase from the present Rs. 100 to Rs. 1,000 per month. Likewise, the hostel expenditure allowance which is presently exempt up to Rs. 300 per month per child for maximum of two children be increased to Rs. 3,000 per month, Assocham said.

Over 72 per cent of the respondents said rising interest rates on home loans and skyrocketing property prices call for doubling the exemption limits for interest on self-occupied property to Rs. 3 lakh from Rs. 1.5 lakh set in 2001.