The budget proposes to make present TDS limit for tax deduction applicable in respect of fixed deposits with all the branches taken together, as compared to each branch earlier
The budget presented by the finance minister does not have much to offer as far as individuals taxpayers are concerned. However I would like to discuss the provisions which will affect an Individual tax payers.
Increase in the limit of for purchase of pension and contribution toward National Pension Scheme (NPS).
Presently a tax payer can claim deduction upto Rs. 1.50 lacs for various payments contained under section 80 C (Covering LIP, NSC, EPF, PPF, ELSS and repayment of home loan etc), Section 80 CCC (payment for purchase of annuity) and 80 CCD(1) (for contribution towards NPS account) in all as per section 80 CCE. However within this overall limit of Rs. 1.5 lacs presently there are individual limits of Rs. One lac under sections 80 CCC and 80CCD(1). The budget proposes to raise these sublimit limit to 1.50 lacs in respect of these two deductions. Please note this is not going to change your overall entitlement which remains at Rs. 1.50 lacs under section 80CCE.
In addition to raising the sublimit limit for NPS from 1 lacs to 1.5 lacs the budget proposes to carve out a separate limit of Rs. 50,000 in respect of your own NPS contribution so the tax payer can contribute Rs. 2 lacs in all and claim the tax benefits.
Enhancement of limit of Mediclaim:
The budget proposes to enhance the limit in respect of deduction for health insurance premium (including Rs. 5,000/- paid for preventive health check up) paid for Individual and HUF from present Rs. 15,000/- to Rs. 25,000. From the wordings of the finance bill it seems there is some omission and the finance bill seems to propose to increase the limit from Rs. 15,000/- to Rs. 25,000/- for HUF only and not to Individual. This seems an accidental omission and shall be corrected in due course.
The limit of Rs. 20,000/- in respect of senior citizen is proposed to be increased to Rs. 30,000/-. Moreover the budget proposes to grant deduction in respect of medical expenses incurred for a person of 80 years or above within the overall limit proposed of Rs. 30,000/-. The proposal for granting deduction in respect of medical expenses incurred for a senior citizen is very good proposal as this will give tax relief to the person who are generally not able to get health insurance and have to incur expenses on medical treatment.
Enhancement in the limit of deduction for medical treatment or insurance for a dependent person with disability.
Presently a person who has incurred expenses for medical treatment or training or pays any insurance premium for maintenance for dependent person with disability gets a deduction of Rs. 50,000/- u/s 80DD. The budget proposes to raise this limit to Rs. 75,000. In case of severe disability the present limit of Rs. 75,000/- is proposed to be raised to Rs. 1,25,000/-.
Enhancement for expenses incurred for treatment of specified disease
Presently Section 80 DDB allows a deduction for expenses incurred for medical treatment of specified disease for self or his family members of Rs. 40,000/-. The senior citizen get a deduction of Rs. 60,000/-. The budget proposes to provide for an enhanced limit of Rs. 80,000/- in case the person suffering from such disease has completed 80 years of age.
Enhancement for ad-hoc deduction from for person suffering from disability
Presently a person suffering from disability gets an ad-hoc deduction of Rs. 50,000/- from total income. In case of sever disability the amount of deduction available is Rs.1,00,000/-. The present budget proposes to revise the limit from Rs. 50,000 to Rs. 75,000/- in case of normal disability and from Rs. 1,00,000/- to Rs. 1,25.000/- in case of severe disease.
Deduction of Tax at source from Interest
There are many amendments as regards provision for TDS on interest. Almost all of the taxpayers earn.
Income from fixed deposits be it bank, post office or a company. The bank or the post office deducts tax while crediting the interest in case the interest being credited or likely to be credited exceeds Rs. 10,000/- in a year. In case of other payers the TDS provisions get triggered on crossing the limit of Rs. 5,000/- Presently the limits of Rs. 10,000/- and 5,000/- are calculated with reference each of the branch and not all the branches together. The budget proposes to make this limit for tax deduction applicable in respect of deposits with all the branches taken together in case the bank or the Company has core banking solution. So now you cannot escape the clutches of TDS even if you open your bank fixed deposits with different branches of the same bank in case the aggregate of the interest on all the deposits is likely to exceed the threshold limit as above as almost all the banks now have core banking solution.
Moreover till now some of the cooperative banks were not deducting tax on interest on fixed deposits from members. The present budget proposes to make the interest credited by the cooperative banks to their members also subject to TDS.
One more changes which will affect you all in the TDS sphere is that presently the interest on recurring deposit (RD) are not subject to TDS. The budget proposes to apply the TDS law to interest on recurring accounts also.
In my opinion these are the important budget proposals which are going to affect a common individual tax payer.
Balwant Jain is a CA, CS and CFP. Presently working as Company Secretary of Bombay Oxygen Corporation Limited. He can be reached at email@example.com.