Mutual Fund Tax Ready Reckoner for year 2013-2014

Continuing the initiative taken last year to provide a one stop solutions for tax implications on mutual fund investments, Bachhat has updated its mutual fund tax ready reckoner for the year 2013-2014.  

As you all are aware, mutual fund investors need to take into account plethora of tax rates to understand post tax returns.  Bachhat's mutual fund tax ready reckoner is an attempt to simplify and help mutual fund investors to determine the tax impact on their mutual fund investments.

You can view the ready reckoner by clicking on this link.  The link also provide rates for the last financial year (i.e. 2012-2013).

Mutual Fund Tax Reckoner

Subsequent to yesterday's blog post on tax impact of mutual fund investments in the hands of individuals, Bachhat has created a separate page on its website to provide complete overview of tax implications on mutual fund investments for all categories of investors.  The page provides tax implications for financial year 2012-13 and shall be updated each year.

The reckoner is shared below for reference.

Mutual Fund Tax Reckoner FY 2012-13



For full screen view of above tax reckoner, click here.


Do let us know your views and suggestions on the above reckoner.

Revision of tax slabs and its impact on tax outgo

Quick analysis of revision of tax slabs and its impact on tax outgo.  Overall male tax payers less than 60 years of age benefits the most and there is now no differentiation between male and female tax payers.

Tax slab revision and its impact



Click here for full page link.

“I MUST BE CRUEL ONLY TO BE KIND”

Impact of budget on an individual taxpayer 

Honourable Finance Minister quoted Shakespeare's immortal words “I must be cruel only to be kind” before beginning his speech on tax proposals.  However for an individual, the budget seems to be a mix of kind and cruel treatment.  Kind enough to tweak the tax slabs favorably and providing additional tax deduction avenues in the form of interest income from savings account deposit and preventive medical check-up and cruel enough to take the entire benefit by way of increase in service tax and excise duty rates. 

THE KIND TREATMENT

The largest benefit given to individual tax payers in the budget is the favourable revision of tax slabs.  The exemption limit has been increased from Rs. 1,80,000 to Rs. 2,00,000 for all individuals (males and females aged less than 60 years).   Taxable income more than Rs. 8,00,000 and less than Rs. 10,00,000 which currently is taxed at 30% shall be taxed at 20% after the budget announcement.  This is a clear benefit of Rs. 20,000 for individuals earning more than Rs. 8,00,000.  The revised tax slabs now are - 10% tax rate for taxable income greater than Rs. 2,00,000 to Rs. 5,00,000; 20% tax rate for taxable income greater than Rs. 5,00,000 to Rs. 10,000,000 and 30% tax rate for taxable income greater than Rs. 10,000,000.

The deductions available for individuals have also increased by making interest income from saving account deposits up to Rs. 10,000 eligible for deduction from taxable income.  In addition, the finance minister has introduced one more avenue for tax deduction – Rajiv Gandhi Equity Scheme (RGES).  Though the details of the scheme are not cleared, investment in equity up to Rs. 50,000 shall be eligible for 50% deduction for individuals earning less than Rs. 10 lakhs.  However, such investment shall have locked in of 3 years.

Further,  expenditure incurred for preventive medical check-up for self, spouse, dependent children or parents up to Rs. 5,000 shall be eligible to be included under overall deduction of Rs. 15,000 under Section 80D.

There are further smaller relief like reduction in the securities transaction tax on delivery based transactions of equity securities from 0.125% to 0.1% of the transaction value and increase in threshold from Rs. 2,500 to Rs. 5,000 for deducting tax on interest from debentures.  Further both listed and non-listed debentures get covered now under the above criteria.

Last year, budget incorporated a provision that the life insurance premium, in order to get benefit under Section 80C, should not be more than 20% of the actual capital sum assured.  Now the budget has proposed that the premium should not be more than 10% of the actual capital sum assured.  This is good for the customers, since this shall result in enhanced insurance coverage for the same amount of premium.  Further the budget also specifies in detail how the capital sum assured shall be calculated so that insurance company do not circumvent this provision by varying the sum assured from year to year. 

THE CRUEL TREATMENT

The cruelest shock in the budget for individuals is the increase in service tax rate from 10% to 12%.  There has also been hike in excise duty rates and this along with service tax rate increase almost negate the benefit of tax savings on account of slab revision.  This shall maintain the inflationary pressure on the prices and shall ensure that interest rates of loan remain high for substantial part of the year.

Further w.e.f October 2012, sale of residential property for transaction value more than Rs. 50 lakhs in specified urban agglomeration or Rs. 20 lakhs in any other area shall attract tax deduction at source of 1% of the transaction value irrespectively whether the transfer is profitable or not.  Individuals cannot evade this, since it has been made mandatory to provide proof of tax deduction while registering the transfer.

Cash purchase of bullion and jewellery for amount more than Rs. 2 lakhs shall lead to tax collection of 1% of the value by the seller.

In case, one has any asset located outside India (financial or otherwise), he has to compulsorily file return of income in India irrespective of whether he has taxable income or not. 

BEING SIXTY GETS MORE SWEETER

After reducing the senior citizen age limit from 65 years to 60 years last year, the fascination of Mr. Mukherjee for senior citizen continues and he has exempted them from paying advance tax in case they do not earn any income from business and profession.  Further the age limits in Section 80D (Health Insurance Premium) and Section 80DDB (treatment of specified ailment) and for no tax deduction certificate has been rationalized to 60 years from 65 years at present. 

Thus it can be seen that the budget is a mixed bag of kind and cruel treatment for an individual taxpayer. 

Modified version of the article to appear in DNA Newspaper dated 17th March 2012

Happy Retirement: Your tax liability decreases as you grow older

One category of individuals who are smiling their way to bank is senior citizens.  Finance minister said that 3 is lucky number for him and he has showered triple bonanza for senior citizens. 

 

First of all, the age limit to qualify for senior citizenship has been reduced by 5 years from 65 to 60 years. The individuals who fall under this category will see their tax outgo reducing by Rs. 9,270 for male individuals and Rs. 6,180 for female individuals.

Secondly, the basic exemption limit is marginally enhanced from Rs. 2,40,000 to Rs. 2,50,000 leading to a tax saving of Rs. 1,030.

However, the main benefit to senior citizens comes once they reached 80 years of age.  Such individuals are classified as ‘Very Senior Citizens’ and for them the basic exemption limits have been hiked to Rs. 5,00,000.  This is more than double of the existing limits of Rs. 2,40,000 and will lead to substantial tax saving of Rs. 26,780.

The table below gives an overview of how the senior citizens have benefitted from the budget proposals.

Taxable Income	Males (aged 60 to 65 yrs)			Females (aged 60 to 65 yrs)
	Existing	Proposed	Savings	Existing	Proposed	Savings
5 Lakh	14,420	5,150	9,270	11,330	5,150	6,180
10 Lakh	35,020	25,750	9,270	31,930	25,750	6,180
15 Lakh	158,620	149,350	9,270	155,530	14,9350	6,180
20 Lakh	313,120	303,850	9,270	310,030	30,3850	6.180

Taxable Income	Senior Citizens (aged 60 yrs & above but less than 80 yrs)			Very Senior Citizens (aged 80 yrs and above)
	Existing	Proposed	Savings	Existing	Proposed	Savings
5 Lakh	26,780	25,750	1,030	26,780	NIL	26,780
10 Lakh	150,380	149,350	1,030	150,380	123,600	26,780
15 Lakh	304,880	303,850	1,030	304,880	278,100	26,780
20 Lakh	459,380	458,350	1,030	459,380	432,600	26,780

This article was also carried in Mumbai's edition of DNA of 1st March 2011.