1. Change in Tax Slabs
The minimum taxable income on which tax has to be
paid was increased from 1.8 lacs to 2 lacs, so the new slab is as follows – Nil
tax between 0-2 lacs income, 10% tax between 2-5 lacs, 20% tax between 5-10
lacs and 30% tax above 10 lacs income. The taxable limit for men and women is
same, which is 2 lacs, but the limit for senior citizens (above 60 yrs) is 2.5
lacs and for very senior citizen (above 80 yrs) is 5 lacs. No change in that.
This means that most of the people will save additional Rs 2,000 on tax outgo ,
thats all . Not a big deal ! .
2. DTC not coming this year, hence ELSS gets one
more year
DTC (Direct tax code) will not be implemented this
year, which was very obvious – thanks to Anna Hazare, Food security bill and
other issues which made sure govt has no time for DTC . What this means is that
Tax Saving Mutual funds (ELSS) are still a tax saving option for 2012-2013 and
you can invest in them and claim tax benefit next year also.
3. EPF (Provided Fund) Interest cut from 9.5% to
8.25%
EPF interest rate cut was not part of this Budget,
but it happened just one day before Budget, and as this is an important update,
you better know that EPF interest rate is reduced from 9.5% to 8.25% now and it
will be applicable from next year. Last year itself the EPF interest rate was
increased to 9.5% . This is a very steep
cut and really wont make any salaried person happy. Not sure what is the reason
to keep it below PPF interest rates. Anyways – you cant do anything about it –
Bite the bullet ! .
4. Income tax exemption for health check-ups upto
Rs 5,000 under section 80D
A new kind of deduction called “preventive health
checkup” is included under section 80D . Till now you were able to claim Rs
15,000 for the medical insurance premium paid for self, spouse and dependent
children, but now you can also include health checkup cost upto Rs 5,000. But
note that this is included in Rs 15,000 limit and not additional one. You can
make cash payments for these checkup’s.
5. Tax exemption for Direct Equity Investments if
income is less than 10 lacs
Just like the above point a new tax deduction is
introduced for direct equity investments, Its called as “Rajiv Gandhi Equity
Saving Scheme” – under which a new equity investor will be able to claim 50% of
his investments in direct equity upto the maximum investment limit of 50,000.
This investment would be subject to 3 yrs lock in period (just like ELSS) .
However this will be available to only those whose taxable income is below 10
lacs. There are 3 questions which I am not clear about and I want to know. a)
Is it only for direct stocks or even equity mutual funds ? b) Is it only for
those who will invest for the first time in equity because the rule mentions
“new retail investor” . c) How will they make sure that a person does not sell
his shares before 3 yrs, will this limit be from demat provider ? Will get more
clarity on this in coming days ! . Read more on Rajiv Gandhi Equity Saving
Scheme from Subra !
6. Tax exemptions on Saving bank interest upto Rs
10,000
Till now all the interest income earned from your
saving bank was taxable. However now saving bank interest income upto Rs 10,000
will not be taxed. Not that it is applicable for Saving bank account, Post
Office Saving account and all co-operative bank accounts. But I doubt how many
people will really be able to take full benefit of it, because to earn 10,000
interest in saving bank, you need to keep anywhere close to 2 lacs or 2.5 lacs,
which does not happen with most of the people. A lot of people anyways never
paid any tax on the interest from saving bank and might be fearful if some one
catches them, now law itself asks them now to pay upto 10,000 , I can see some
witty smiling faces . Also dont confuse
this with interest earned on your Fixed Deposit, that is still taxable!
7. Life Insurance deduction available only if
premiums are below 10% of Sum Assured
This is a little hidden clause and not highlighted
by media, but as per the budget, any life insurance policy issued on or after
1st Apr 2012, will be eligible for “tax exemption each year [80C] and “no tax
on maturity [section 10(10D) ]” only if the yearly premium in all the years are
below 10% of Sum Assured. Currently this percentage is 20%. So for example if
you buy a life insurance policy with premium of Rs 20,000 for a Sum Assured of
Rs 1,00,000, then it will not qualify for tax exemptions because here premium
is 20% of sum assured. However existing policy holders dont have to worry about
this, their policies wont be affected.
8. Securities Transaction Tax (STT) reduced from
0.125% to 0.1%
Whenever an equity transaction is done, STT
transaction tax is applicable and you have to pay it. It was 1.25% earliar, but
now its reduced to 1%. So it means you will have to pay less for your equity
transactions. Good for those who buy/sell stocks/mutual funds frequently or in
big quantities.
9. Service Tax increased from 10% to 12%
This move should worry you, because with increase
in service tax, your bills for telephone, internet, hotel stay, eating out at
restaurants, flying by air and several other kind of services will cost a
little more, because we all pay service tax on all these things. So as service
tax is increased from 10% to 12%, we will pay 2% more on the bill amount. This
will add up to a good enough amount in whole year even though it does not bite
you in small installments. Surprise! – Be ready to pay more for your Life
Insurance and Health insurance premiums also, because we pay service tax on the
premiums too. As per a rough estimate for most of the urban class people like
you and me, the additional service tax we will pay due to this will cancel out
that Rs 2,000 additional tax saving which happened due to increase in tax
limit.
10. TDS @1% at the time of real estate sale above
50 lacs
A lot of people will cry hearing this one and will
not appreciate this move by govt, but it’s for good. As per this budget, now
whenever you sell your residential flat/house/plot (any kind of real estate)
and the selling price is more than 50 lacs, you will have to compulsorily pay
TDS @1% . This is actually a big problem, because it might happen that even
though the sale value is above 50 lacs, but after indexation and your decision
to use the funds in next house purchase, your overall tax out of the
transaction might be Zero, but still you will have to pay 1% TDS. So in worst
case you will have to claim that tax amount back by filing a return. Note that
property registration will not be permitted without proof of deduction and
payment of this TDS , so you cant escape it, incase you thought you thought you
will escape somehow. All the registration offices across the country will be
following this one.
11. Increase in Excise Duty from 10% to 12%
Excise duty is the tax paid by manufacturers on
production of any kind of goods. So now that is increased from 10% to 12%. So
it means that manufacturers pay more tax and recover that same additional
burden from consumers, which in turn means that a lot of goods will get
costlier, it would include daily use items and what we consume in day-to-day
life. Anyways – you never realise this as consumer because instead of increasing the price, they
reduce the weight of the product, I hope you know that the Maggi packs which
used to be 100 gms , are now 90 gm from many years and still costs Rs 10 and
you were so happy all these days! .
12. For Medical Insurance – Senior citizen age
reduced from 65 yrs to 60 yrs
In the last budget the age for senior citizen was
reduced from 65 yrs to 60 yrs, but it was not applicable for sec 80D and
80DDB. Till now people above 65 yrs old
were considered as senior citizens in case of medical insurance deduction, but
in this budget, that rule is amended and anyone above 60 yrs will be considered
as senior citizen. Infact now for all the taxation purposes, senior citizen age
is above 60 yrs. In case of Sec 80DDB , the deduction up to Rs. 40,000/- for
the medical treatment of a specified disease or ailment is allowed.
13. Tax Benefit on Infrastructure bonds removed
2 yrs back Tax Saving Infrastructure bonds were
introduced and apart from 80C (1,00,000), additional 20,000 was eligible for
tax exemption. However this year this benefit is not extended and now there is
no tax exemption on Infrastructure bonds. However companies are allowed to
issue 60,000 crore worth of bonds compared to 30,000 crore worth bond last
year. However I doubt if the excitement this time will be very high as it was
last year. (source)
Some Other Changes
No Advance Tax for Senior Citizens if no income
under head “Income from Business” .
The amount of goods you can bring from outside
India increased to Rs. 35,000 from the earlier Rs. 25,000 .
Tax filing compulsory for any resident who holds a
property outside India even if the taxable income in India is below the limit.
Under Section 80G, any donation made above 10,000
has to be done by any mode other than cash. Till now you could donate through
cash by cash, but now that limit is there.
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