The Budget 2013 was announced today. Here, we talk about a few changes proposed by the Finance Minister, which will impact personal taxation directly. These proposals will become a part of the income tax law only when the parliament passes them.
No Revision in Tax Slabs or Tax Rates:
Per our Finance Minister, “In a constrained economy, there is little room to raise tax rates or large amounts of additional tax revenues. Equally, there is little room to give away tax revenues or the tax base. It is a time for prudence, restraint and patience. The current slabs were introduced only last year. Hence, I am afraid, there is no case to revise either the slabs or the rates. Besides, even a moderate increase in the level of threshold exemption will mean that hundreds of thousands of tax payers will go out of the tax net and the tax base will be severely eroded. Nevertheless, I am inclined to give some relief to the tax payers in the first bracket of Rs. 2 lakh to Rs. 5 lakh. Assuming an inflation rate of 10 percent and a notional rise in the threshold exemption from Rs. 2,00,000 to Rs. 2,20,000, I propose to provide a tax credit of Rs. 2,000 to every person who has a total income upto Rs. 5 lakh.”
So, for whatever it’s worth, you will get a tax credit of Rs. 2,000 if your income is below Rs. 5 lakh.
Surcharge of 10% on affluent taxpayers:
“When I need to raise resources, who can I go to except those who are relatively well placed in society? I believe there is a little bit of the spirit of Mr. Azim Premji in every affluent tax payer. I am confident that when I ask the relatively prosperous to bear a small burden for one year, just one year, they will do so cheerfully”, said the Finance Minister.
If you are one amongst the 42,800 persons, who admitted to a taxable income exceeding Rs. 1 crore per year, then a surcharge of 10 percent will be imposed on you. This will apply to individuals, HUFs, firms and entities with similar tax status. The additional surcharges will be in force for only one year, that is Financial Year 2013-14.
Additional deduction of Rs. 1 lakh on select home loans
If you are taking a loan for your first home from a bank or a housing finance corporation upto Rs. 25,00,000 during the period 1.4.2013 to 31.3.2014, you will be entitled to an additional deduction of interest of upto Rs. 100,000. This will promote home ownership and give a fillip to a number of industries like steel, cement, brick, wood, glass etc. besides jobs to thousands of construction workers.
The limit on home loan interest deduction, for a self-occupied property, was previously upto Rs. 1,50,000.
Other Proposed Changes relevant to individual taxpayers:
- Property Transactions: Tax Deduction at Source (TDS) at the rate of 1 percent on the value of the transfer of immovable properties where consideration exceeds Rs. 50 lakh. Agricultural land to be exempted. Transactions in immovable properties are usually undervalued and underreported. One-half of the transactions do not carry the PAN of the parties concerned. The step to deduct 1% TDS is with a view to improve the reporting of such transactions and the taxation of capital gains.
- RGESS: Rajiv Gandhi Equity Savings Scheme (RGESS) will be liberalized to enable the first time investor to invest in mutual funds as well as listed shares and she can do so, not in one year alone, but in three successive years. The income limit will be raised from Rs. 10,00,000 to Rs. 12,00,000.
- Inflation protected savings: Instruments protecting savings from inflation to be introduced. These could be Inflation Indexed Bonds or Inflation Indexed National Security Certificates. The structure and tenor of the instruments will be announced in due course.
- NRI taxation: With a view to attract investment in long term infrastructure bonds in foreign currency, the rate of tax on interest paid to non-resident (NRI) investors was reduced last year from 20 percent to 5 percent. It has been proposed to extend the same benefit to investment made through a designated bank account in rupee denominated long term infrastructure bonds.
If you have any query regarding your taxes, or if you wish to engage a dedicated Chartered Accountant to assist you throughout the year, send email to firstname.lastname@example.org