Budget 2016 was prepared keeping in mind the existing global scenario and can be termed as an incremental move towards the backdrop of global uncertainty. Though there is nothing much in the budget to provide respite to the common taxpayers & investors community except few announcements which may help in building the confidence of the tax payers with respect to reducing the litigations or ease in handling the income tax scrutiny cases. Let us understand the impact of Budget 2016 in detail-
- No Change in Tax Slabs: There is no change in the income tax slabs, existing slabs to continue.
- Limit u/s 87A: The deduction limit u/s 87A of the Income Tax Act has been increased by Rs. 3,000/- from the existing Rs. 2,000, the enhanced limit is Rs. 5,000 per annum from the next financial year. But this section applies to those who have total income of less than Rs. 5 lakh.
- NPS Withdrawal: Now, the withdrawals from your NPS on the maturity will be tax free up to 40% of the total corpus accumulated. This is a move to take NPS become closer to the other competing products like PPF & EPF, where the withdrawal is tax -free. Similar provision will also apply on EPF and super annuation withdrawal. It means, if you have Rs. 10 lakhs accumulated at the time when you turn 60 years of age, then up tp 60% of it can only be withdrawn which means total Rs. 6 lakhs can be withdrawn and out of this Rs. 6 lakhs, 40% of corpus i.e. Rs. 4 lakhs will be exempt from tax.
- Increase in Surcharge: Super rich have to pay more income tax due to increase in the surcharge rate from the existing 10% to 15% , this applies to the individuals whose earnings are more than Rs 1 crore , those are called super rich as per the income tax department.
- Undisclosed income: Now a taxpayer can declare his undisclosed income by paying the total tax of 45% which comprises of 30% Income Tax, 7.5% surcharge and penalty of 7.5 of the undisclosed income. They will get immunity from the prosecution. It means those who had not declared their income to the department and no tax is being paid by them then these people can voluntary declare that income and pay 45% tax on it. It means the black money what they have will become white if they pay 45% tax on it and they will not be harassed or prosecuted in future because of their wilful disclosure & payment thereon.
- E-Assessment: Government will launch e-assessment in the seven cities wherein no physical presence will be required to deal with scrutiny cases, this is indeed a great move to help taxpayers get freed from running around income tax offices and worrying about income tax notices or paying huge fees to their chartered accountants.
- Turnover Limit u/s 44AD: The total turnover limit under Presumptive taxation scheme u/s 44AD of the Income Tax Act is being raised to Rs. 2 crores providing a huge relief to a large number of taxpayers in the MSME category. This section will also cover the professionals like those who are in to legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration , who will opt for the presumptive taxation scheme also to benefit with the revised limit, now the profit from their profession will be deemed to be 50% with gross receipts up to 50 lakh.
The people who do not have any house of their own and also do not get any house rent allowance from any employer today get a deduction of Rs 24,000 per annum from their income to compensate them for the rent they pay. The same limit has now been raised to Rs. 60,000 annually as per section 80GG of the IT Act.
According to the budget proposed changes, the existing provisions under Section 80GG allows a deduction of any expense as incurred by any individual exceeding ten per cent of his total income for the payment of Rent for any furnished or unfurnished accommodation which he had occupied for the purposes of his own residence. Also, to avail the benefit, he must not have granted any house rent allowance by his employer and the benefit was capped at Rs 2,000 per month or 25 per cent of his total income for the year, whichever is less and the same limit is enhanced to Rs. 60000 with effect from the next financial year.
- It is proposed to provide a deduction of 100% of the profits generated by an eligible startup which is involved in the business of innovation, development, deployment of new products or processes or services driven by technology or intellectual property.
- Start-ups will get 100% deduction for their profits for the first 3 out of 5 years means no tax on income, if any and provided that it is being set up during April, 2016 to March, 2019.
- Registration for Start-ups: Government to incorporate changes in the companies act to felicitate registration of new start-ups in one day.
Stand-Up India scheme will allocate Rs.500 crore for the SC/ST & women entrepreneurs; let us see how this fund will get allocated to boost entrepreneurship amongst women.
First Time home buyers will get an additional deduction of Rs 50,000 towards interest on their home loan which should be up to Rs 35 lakh and with a condition that the cost of the house should not exceed Rs. 50 lakh.
What will cost you more: Food, Luxury Items, Jewelery etc.
Be ready to shell out more for your cigarettes, branded garments and services like bill payments, air travel or eating out as these are set to become more expensive. Apart from these, Gold Bars or Hiring a Packers & movers, Gold & silver, Jewelery articles excluding silver, E-reading devices, Ropeway, Cable car rides, Lottery tickets, Water including mineral water, Aluminium foil, Air travel, Plastic bags & sacks. The budget had also proposed a Krishi Kalyan cess of 0.5 per cent on all taxable services.
Where you will save more!
You can save money on the footwear, Solar lamp, Broadband, modems, set top boxes, CCTV cameras, low cost houses with less than 60 sqaure meter carpet area, microwave ovens, sanitary pads and Braille paper.
Car prices are set to rise due to a proposed cess of 1 per cent on small petrol, LPG and CNG cars and 2.5 per cent on diesel cars apart from 4 % on other high-powered vehicles and SUVs.