The finance minister did not have much for individual taxpayers and investors in his budget. There were no changes in Income Tax slabs, no extra tax deductions on investments, and no change in long-term capital gains tax on equity. Subscribers of National Pension Scheme (NPS) have a reason to celebrate, though. As per the budget proposal, they will soon have the option to withdraw 40 per cent of the accumulated corpus tax-free from NPS. At the moment, NPS subscribers must compulsorily use at least 40 per cent of the corpus to buy an annuity income and they have the option to withdraw the remaining money. However, the withdrawal was taxed as per the Income Tax slab applicable to the investor. The finance minister has also said that the same rule will apply to corpus made by contributions after April 1, 2016 in superannuation funds and recognized provident funds, including Employees Provident Fund. That means, you cannot withdraw the entire money tax-free from EPF anymore. Only 40 per cent of the corpus accumulated after April 1, 2016 can be withdrawn tax-free. It is not clear whether the subscriber will have the option to withdraw the rest of the money after paying tax or s\he must use the rest of the money to buy an annuity. The question assumes significance because the new proposal was listed under the heading "moving towards a pensioned society."
Here are the highlights from the budget that may have an impact on your finances.
- If your income is less than ₹5 lakh, you will get a tax rebate of ₹5,000 under Section 87A. Currently, the tax rebate is ₹2,000.
- If you do not have a house of your own and you do not get any house rent allowance from your employer, you can claim a deduction of ₹60,000 under Section 80GG. At the moment, such individuals can claim a deduction of only ₹24,000.
- A National Pension Scheme (NPS) subscriber can withdraw up to 40 per cent of the accumulated corpus tax-free. At the moment, withdrawals are taxed at the Income Tax slab applicable to the subscriber.
- The same withdrawal rule will apply to corpus created out of contributions made after 1.4.2016 in superannuation funds and recognized provident funds, including EPF. Currently, an individual has the option to withdraw the entire corpus from these funds.
- The annuity fund which goes to the legal heir after the death of pensioner will not be taxable.
- An employer can claim tax benefit of only up to ₹1.5 lakh on contributions to recognized Provident Fund and Superannuation Fund.
- Service tax on Single premium Annuity (Insurance) Policies reduced to 1.4 per cent from 3.5% of the premium.
- First-time home buyers can claim an additional deduction of ₹50,000 on interest paid for loans up to ₹35 lakh sanctioned during the next financial year, provided the value of the house does not exceed ₹50 lakh.
- Individuals, HUFs and firms receiving dividends of more than ₹10 lakh per annum will have to pay 10 per cent tax on the gross amount of dividend.
- Income tax surcharge raised from 12% to 15% on persons with income of above ₹1 crore.
- Purchase of luxury cars above ₹10 lakh and purchase of goods and services in cash exceeding ₹2 lakh would attract 1 per cent TDS.
- Securities Transaction Tax on 'Options' increased from 0.017% to 0.05%.
- Krishi Kalyan Cess of 0.5% on all taxable services from 1 June, 2016.
- Infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs.
- Excise duties on various tobacco products other than beedi raised by about 10 to 15%.
- Non-residents need not pay higher TDS if they provide alternative documents to PAN card.
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