“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.”
This statement made by Honorable
finance minister Mr. P.Chidambaram summarizes what is (or is not) in store for
individuals in this budget. There has
been no change in the income slabs based on which tax is determined. To benefit individuals who earn less than Rs.
5 lakhs per annum, a minuscule tax credit of rupees two thousand has been
given. Besides this there is hardly any
permanent additional benefit for individuals in the budget. Certain changes which shall impact your tax
liability and determine your investments are covered below.
Interest on home loan eligible up to Rs. 2.5 lakh
An individual planning to
purchase residential housing property shall get an additional deduction of Rs.
1 lakh on the interest amount paid to service the home loan. However, this benefit comes with many
riders. First, this benefit is for individuals
who do not own any residential properties at the time of sanction of loan
amount. Second, the value of such
property should not exceed Rs. 40 lakhs.
Third, the home loan amount should not exceed Rs. 25 lakhs and it should
be sanctioned in financial year 2013-14.
If the interest amount during the year is less than Rs. 1 lakh, the
balance amount can be claimed in the subsequent year.
Scope of RGESS widened
Rajiv Gandhi Equity Savings
Scheme (RGESS) was introduced in the last budget to attract new retail
investors to invest in equities. The
scope of the scheme has been increased to cover listed units of an equity
oriented mutual fund and individuals having total income upto Rs. 12 lakhs are
now elligible to claim this deduction.
The deduction, which was earlier restricted for one year, is now
available for 3 consecutive years from the date of first such investment.
Other changes which impacts your investment decisions
The securities transaction tax
(STT) on equity oriented mutual fund has been reduced which shall lead to
increased returns from equity mutual fund investments.
On the other hand, dividend
distribution tax on debt oriented mutual funds has been increased from 12.5% to
25% discouraging debt oriented mutual funds with dividend payout option.
Any transfer of immovable
property, other than agricultural land, of value equal to or exceeding Rs. 50
lakhs shall attract 1% TDS on the
property value.
Further it has been proposed that
where any immovable property is received for a consideration less than the
stamp duty value of the property by an amount exceeding Rs. 50,000, the stamp
duty value of such property as exceeds such consideration, shall be chargeable
to tax in the hands of individual.
Commodity transaction tax has
been introduced wherein sale of commodity derivatives (other than those
involving agricultural commodities) shall attract transaction tax @ 0.01%.
On positive side, the finance
minister has proposed introduction of inflation indexed bonds or inflation
indexed national security certificates.
This shall give investor inflation adjusted interest returns and shall
be a good investment alternative. The
tax free bonds, which provide tax free interest to the investors, shall
continue to be issued in the next year.
(Concise version of the above post was printed in DNA's edition of 1st March 2013)
