Real benefit is for those earning in the Rs 8-10 lakh bracket as it will give a straight and flat tax relief to the extent of Rs 20,000 .
Individuals can gain on the tax front but the overall situation will end up being a negative as higher expenses in the form of additional service and excise eats up a larger part of their household budget. At the same time there are also a lot of gains on the procedural front that should not be forgotten.
Save Rs 2,000 from rise in basic exemption limit
Starting with the tax gain, there is a small benefit that is available in terms of the rise in the basic exemption limit that has been increased to Rs 2 lakh for individuals. This means a savings of Rs 2,000 in tax for men and a savings of Rs 1,000 for women. There is no extra benefit for the female taxpayers as the basic exemption limit for everyone stands at Rs 2 lakh. So this difference has now been eliminated.
Real benefit is for those earning in the Rs 8-10 lakh bracket
The real benefit on the tax front is for anyone who has a higher amount of income as the 20 percent tax slab has been increased from Rs 8 lakh to Rs 10 lakh. This will give a straight and flat tax relief to the extent of Rs 20,000 for anyone who has income in excess of Rs 10 lakh. Taken together with the earlier benefit the total figure for men will go upto Rs 22,000 and for women to Rs 21,000.
New investors to gain from Rajiv Gandhi Equity Saving Scheme
There is another benefit that will be available for new investors in a scheme called Rajiv Gandhi Equity Saving Scheme. This will provide for a deduction of 50 percent up to Rs 50,000 of investment made but there will be a 3-year lock in. Further details would come in due course and these will list out whether the conditions required to meet the qualification are easy enough to let new investors gain from the initiative. The manner in which the funds will be managed is also important as investors want tax benefits with returns on the investment.
Filing of returns made easier
There is a big relief on the administrative front as having to collect small details about interest on savings banks and then paying tax on this has been tackled. There is a deduction of Rs 10,000 for income earned as savings bank interest so most people will gain on this front and it will make the filing of returns easier as there will not be any extra tax to be paid. The salaried will benefit the most as they need not pay any additional amount of tax when there is a full deduction on all the other income in the form of tax deducted at source.
Investors can now reduce their expenses when investing
Investors will be able to reduce their expenses when they are investing due to the reduction in the securities transaction tax on delivery-based transactions. While the figure has been reduced marginally the impact of this will be extremely small for the investors who undertake equity investing so it is more of a sentiment boosting measure.
Contributing capital to a Hindu Undivided Family has also become easier
Contribution made by a member in the form of property or sum to a HUF will be excluded from taxation while earlier this could be classified as a gift and then taxed since it was not from an exempted source.
Procedural and other changes in the budget:
Deduction of expense made on preventive checkups has been proposed upto Rs 5,000
While this will encourage individuals to go in for preventive checkups and get a tax benefit for the same, there is no extra benefit as the figure is within the overall limit for payment of health insurance premium. So this is just another route to get the health expense deduction and is nothing additional.
Senior citizens might not have gained in terms of a higher tax benefit
But they will have a lower administrative compliance requirement they will not have to pay advance tax when they do not have business income in their portfolio. This is a good thing and they will be spared from the unnecessary interest cost and other compliance problems of remembering and making advance tax payments. Further the senior citizens definition has been streamlined across many areas to make it consistent at 60 years of age to ensure that benefits do not get get held up due to the wordings of an individual section.
Bad news for those who want to buy property
The bad news is that there has to be a Tax Deduction at Source on the sale of property when the value of this exceeds Rs 50 lakh in a specified urban agglomeration and Rs 20 lakh in other areas. This will lead to situations where normal individuals will also have to pay tax on transactions that they undertake. The transferee has to deduct and pay the tax so the person who is buying the property is the one who has to undertake the process. This is expected to be completed smoothly as there will be a one-page challan for payment and the person who is the transferee will not even have to take a tax deduction number for this purpose as this would be a one-time transaction.
Qualifying your life insurance policy for a tax deduction just got easier
Ensuring that your life insurance policies qualify for a tax deduction just got easier as the premium paid has been reduced to 10 percent of the sum assured from 20 percent earlier. This means that a larger number of policies will qualify for tax benefits.
Alternate Minimum Tax to cover individuals also
There is a bit of bad news for individuals as even they have been brought under the Alternate Minimum Tax (AMT) net. A person who has claimed a deduction under any section of Chapter VIA will be liable to pay AMT. Most people claim benefits under this section and hence they will get covered if their adjusted income exceeds Rs 20 lakh. This income limit is the feature that will keep a large number of individuals out of the AMT net but for those who fall under the condition there is some additional work waiting for them.
Where the regular income tax payable is less than the AMT (18.5 percent), the adjusted income becomes the taxable income and hence this will be used for the purpose of tax calculation of the AMT at 18.5 percent. Calculating the various terms here will involve a lot of workto be done but the bottomline is that high income individuals will need to comply with some complicated provisions.