As rightly predicted by us weeks ago, the budget has been in tune with the Modi government’s agenda of attacking black money, with no change in tax slabs. In brief, Budget 2015 has made PAN mandatory for transactions above Rs. 1 lakh and increased deduction for medical, transport and pension. Actually, there was not much room for change in tax exemptions, hence they remain unchanged.
PAN mandatory for transactions above Rs 1 lakh:
PAN being made mandatory for any purchase or sale exceeding Rs. 1 lakh, is the right step but implementation holds the key for getting the desired results out of this bold move. There are many transactions being made in cash by black money earners/holders and they would be subjected to come under the tax net through this step. The question is how the sale/purchase transaction would get updated in the tax department database.
Tax Slab unchanged but deduction increased:
No change has been proposed in the rate of personal income tax. This is actually a good sign of stable taxation policy which can help in long term planning. However, additional tax benefit to the salaried taxpayer from Budget 2015 is Rs. 40,000 through increased deductions, as given in the table below:
|
Benefits available to salaried employees in F.Y. 2015-16 |
||||
| Particulars of Income | 2014-15 | 2015-16 | Benefit | |
| Income from Salary |
1200000 |
1200000 |
0 |
|
| Less: Transport allowance |
9600 |
19200 |
9600 |
|
| Income chargeable under salary |
1190400 |
1180800 |
-9600 |
|
| Income from house property |
200000 |
200000 |
0 |
|
| Net income |
990400 |
980800 |
-9600 |
|
| Less deduction: |
285000 |
405000 |
120000 |
|
| 80C- included Sukanya deposit @9.1% |
150000 |
150000 |
0 |
|
| 80CCD – Over and above 80C for NPS |
0 |
50000 |
50000 |
|
| 80D – Medical premium for family |
15000 |
25000 |
10000 |
|
| 80 D -Medical premium for senior citizen |
20000 |
30000 |
10000 |
|
| 80DD- Medical treatment of disable dependent |
50000 |
75000 |
25000 |
|
| 80U |
50000 |
75000 |
25000 |
|
| Net Taxable Income |
705400 |
575800 |
-129600 |
|
| Tax on Total Income |
36620 |
-2260 |
-38880 |
|
| Education Cess |
1099 |
-68 |
-1166 |
|
| Total Tax |
37719 |
-2328 |
-40046 |
|
| Tax Saving from Budget 2015 | Rs. 40,046 | |||
Transport Allowance Rs. 1600 p.m.:
The tax exempt limit of transport allowance has been increased from Rs. 800 to Rs. 1600 p.m., demand for which was pending for years.
Medical gets more tax benefit:
Medical premium deduction under section 80D has been increased from Rs. 15,000 to Rs. 25,000. Young taxpayers are not exhausting the existing limit and there are less chances of them utilizing the increased limit of Rs. 25,000. However, the increase in deduction amount for senior citizens from Rs. 20,000 to Rs. 30,000 would be very useful. For super Senior citizens, whose medical insurance is not possible, deduction up to Rs. 30,000 is now allowed on medical expenses incurred.
Deduction u/s 80DD of the Income tax Act in respect of maintenance, including medical treatment of a dependant who is a person with disability, has been increased from Rs. 50,000 to Rs.75,000, and from Rs. 1 lakh to Rs. 1.25 lakh in case of severe disability.
Deduction under section 80 DDB:
Very senior citizen’s can now claim higher expenditure on account of specified diseases as the limit has been increased from Rs. 60,000 to Rs. 80,000.
Deduction under section 80U in case of a person with disability, has been increased from Rs. 50,000 to Rs. 75,000, and from Rs. 1 lakh to Rs. 1.25 lakh in case of severe disability.
Option with interest higher than PPF under section 80 C:
Investment up to Rs. 1,50,000 in Sukanya Samriddhi Scheme will be eligible for deduction u/s 80C and any interest received from the scheme shall not be liable to tax. The interest in Sukanya Samriddhi Scheme is 9.1% whereas PPF interest rate is 8.7%. Minimum deposit of Rs. 1000 and maximum of Rs. 1,50,000 can be made in a financial year. There in no limit on number of deposits either in a month or in a Financial year. A legal Guardian/Natural Guardian can open account in the name of Girl Child.
Increased deduction for pension savings:
Contribution to pension and new pension scheme has been raised to Rs. 1.5 lakh from the current limit of Rs. 1 lakh under section 80C. Besides this, contribution of Rs. 50,000 can be made towards NPS u/s 80CCD, which is over and above the section 80C limit of Rs. 1.50 lakh. Indian taxpayers are actually not saving for their retirement and the government doesn’t have the funds to support the elderly on its own. Hence, directing the saving towards retirement of taxpayer is a good step. However, presently there are very few subscribers to pension fund and increasing this limit alone would not encourage the taxpayers. This is because self contribution comes within 80C limit of Rs. 1,50,000 and employer’s contribution option is available only in few corporate. Therefore, to make it popular and workable, the condition of employer’s contribution for additional deduction for NPS should have been withdrawn.
Super Rich to pay more tax:
Those earning Rs. 1 crore or more would be charged 2% more surcharge. However, wealth tax act has been abolished due to poor tax collections.
Increased reporting and control on Cash transactions:
This has been done to incentivize Credit and Debit Card transactions, and discourage the cash transactions. Acceptance or re-payment of an advance of 20,000 or more in cash for purchase of immovable property has been prohibited.
Tax Evaders penalties hiked and new law proposed:
Benami Transaction Prohibition Bill for domestic black money and a new law for black money have been proposed. Further, evasion of tax in relation to foreign assets to have a punishment of rigorous imprisonment up to 10 years, with a penalty rate of 300%, and the offender will not be permitted to approach the Settlement Commission.
Imprisonment for non or wrong filing of return increased to 7 years:
Non-filing of return/filing of return with inadequate disclosures to have a punishment of rigorous imprisonment up to 7 years, presently it is 3 years. However, there are lakhs of non/wrong filers and we rarely see the imprisonment being awarded.
Click here to read our article on expectations from Budget 2015.
