Income Tax: How Budget 2012-13 will affect your finances

By Parizad Sirwalla, Partner, Tax and Regulatory at KPMG.
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Dec 17, 2012, 12.09 PM | Source: Moneycontrol.com

Income Tax: How Budget 2012-13 will affect your finances

By Parizad Sirwalla, Partner, Tax and Regulatory at KPMG.

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Income Tax: How Budget 2012-13 will affect your finances

By Parizad Sirwalla, Partner, Tax and Regulatory at KPMG.

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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.

Exemptions/ Deductions

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.

Compliances

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.

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