Budget 2016 - What it holds for individual tax payers
Shalini Jain March 1, 2016A common man had a lot of expectations from the Budget 2016. Let us see if the expectations have been met and what is in store for the individual tax payers.
The usual expectation of individual tax payers from the Budget always is for the increase in minimum amount subject to tax. The 2016 Budget did not bring any changes to the slab rates. However, tax rebate for individuals whose income is Rs 5 lacsor lesshas been increased from Rs 2,000 to Rs 5,000.
An increase in surcharge from 12% to 15% has been proposed for individuals with income more than Rs 1 crore.
A welcome move is for individuals who do not receive house rent allowance from the employers but pay house rent. The deduction for rent paid by such individuals has been proposed to be increased from Rs 24,000 to Rs 60,000 per annum.
Much to the disappointment of the individuals, the Budget proposesto tax dividend of more than Rs 10 lakh @10% on a gross basis.
Self-occupied house property
Deduction up to Rs 2 lacs per annumis allowed for interest on loan for acquisition/ construction of self-occupied property. Additional deduction of Rs 50,000 per annum for interest on loan by first-time home buyershas been proposed. This deduction would be available if the value of house does not exceed Rs 50 lacs, amount of loan does not exceed Rs 35 lacs and the loan is sanctioned between 1 April 2016 to 31 March 2017.
The deduction for interest of Rs 2 lacsis available if the house is acquired/ constructed within 3 years from end of financial year of availing the loan. It has been proposed to increase thistime limit to 5 years since most of the housing projects get delayed.
Contribution to pension funds
An expectation from the 2016 Budget was to provide for exemption for withdrawal from National Pension System (NPS). Presently, NPS withdrawals are taxable.The 2016 Budget has proposed that 40% of such withdrawal would be exempt from tax.
While exemption has been provided for 40% of withdrawal from NPS, it has been proposed that the tax exemption for withdrawal fromRecognized Provident Fund (RPF) and Superannuation Fund (SAF) in relation to contributions made starting 1 April 2016 would be restricted to 40%. The withdrawals from such funds were earlier exempt from tax subject to conditions.
Further, employer's contribution to RPF and SAF exceeding Rs 1.5 lakh would now be taxable.
Exemption has been proposed for one time portability of transfer of balance from a RPF/ SAF to NPS.
Currently, a belated return, i.e.return filed after due date cannot be revised. It is proposed to permit revision of such return within similar timelines as for a revised return.
The Budget has proposed limited period compliance window for domestic tax payers to declare undisclosed income on which tax and penalty totalling to 45% would need to be paid. There would be no scrutiny or enquiry in relation to these declarations and declarants would also have immunity from prosecution.
Various other measures such as reducing the penalty in specified cases, payment of interest by Government at 9% (in lieu of the present 6%) in case of delay in giving effect to Appellate Orders, e-assessments for all assessees in 7 mega cities etc have also been proposed.
While the proposals in relation to providing relief to small tax payers, e-assessments etc are welcome, measures such as taxability of PF withdrawal may not bring any cheer to the individual tax payers.