By Parizad Sirwalla, Partner, Tax and Regulatory at KPMG.
Parizad Sirwalla � Partner, Tax and Regulatory - KPMG
The key proposals impacting individuals are as below:
Tax Slab Rates
The slab rates (for individuals below 60 years of age) have been aligned to the proposed Direct Tax Code (DTC):
|Annual Income||Tax Rates|
|Upto Rs. 200,000||Nil|
|Rs. 200,001 to Rs. 500,000||10%|
|Rs. 500,001 to Rs. 1,000,000||20%|
|Rs. 1,000,001 and above||30%|
Depending on the income, individuals will have annual tax savings ranging from Rs. 1,030. to Rs.22,660. This is a positive move in the direction of converging to the proposed DTC slabs. The Standing Committee report on the DTC had far more advantageous slabs which are not currently factored.
To attract more investors to stock markets, a new scheme is proposed (details to be notified) Rajiv Gandhi Equity Savings Scheme, where 50 % deduction is proposed on investment upto Rs.50,000 directly in equities for taxpayers with annual income upto Rs. 10 lacs. Further, securities transaction tax is proposed to be reduced from 0.125% to 0.1% on delivery based transaction.
To reduce the compliance burden, Senior citizens with no business/ professional income are no longer required to pay advance tax.
With the thrust being on deterring the generation and use of unaccounted money, resident individuals having assets outside India would be compulsorily required to file tax returns even if their income is below the threshold limit of Rs.2,00,000 p.a. Correspondingly, the tax officers now can reassess the income for a period of 16 years as against 6 years currently, if the individual has income from assets outside India.
For self employed persons, the threshold limit of turnover has been increased from Rs. 60 lakhs (Rs.15 lakhs for professionals) to Rs. 1 crore (Rs.25 lakhs for professional) for mandatory tax audit of specified books of account. This should provide some respite.
In summary, the FM by reducing slabs has provided with more net disposable income, what remains to be seen is how much of the same will be used up to pay the additional service tax at an increased rate of 12% on a wider gamut of services.
> Tax Slab enhanced/ limits aligned with proposed Direct Tax Code.
> Savings bank/ post office account interest exempt upto Rs. 10,000 p.a.
> No advance tax for senior citizens who don�t have business income.
> Securities Transaction Tax reduced to 0.1%
> Specific deduction of upto Rs. 5,000 for expenditure incurred on preventive health check up
> Relief from long term capital gains tax on sale of residential property if invested in shares of a manufacturing SME company.
> Introduction of scheme for 50 % deduction on direct investment in equities. Scheme to be specified.
> Threshold for tax audit increased to Rs. 1 crore and Rs.25 lakhs for specified business and profession respectively.
> Eligible age of senior citizens for certain tax reliefs (health insurance etc) now at par (at 60 years) with age limit for slab rates prescribed last year.
> Threshold of salary increased to 10 lacs p.a. for levying wealth tax on companies for residential house allotted to employee.
> Exemption for amounts/ property received from relatives without consideration extended to HUFs.
> Relatively lower savings for women tax payers as no separate slab benefit.
> No provision for deduction for infrastructure bond investment upto Rs 20,000 p.a.
> Service tax net broadened and tax rate increased to 12 %.
> Deduction for LIC premium amount available only if premium amount is less than 10% of the sum assured.
> LIC maturity amount exempt only if premium amount is less than 10% of the sum assured.
> Mandatory tax filing for resident assignees having any asset located outside India.
> No tax relief for donations exceeding Rs.10,000 if made in cash.
> Tax rates of foreign/non-resident entertainers, sportsmen and sports associations increased to 20% from 10%.
> Re-opening of assessment upto 16 years if overseas unaccounted income.
> Sale of house property by a resident now subject to tax deduction at source @ 1%.
> Sale of bullion/jewellery in cash now subject to tax collection at source.