Personal Taxes: India
This is a collection of articles archived for the excellence of their content.
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2014: The Times of India’s guide: I
TIMES GUIDE TO PERSONAL TAX
The Times of India Jul 11 2014
The raising of the maximum deduction limit in respect of interest on home loan for self-occupied property from Rs 1.5 lakh to Rs 2 lakh will translate into maximum savings up to Rs 16,995
Proposal: The basic threshold limit for taxpayers is proposed to be increased from Rs 2 lakh to Rs 2.5 lakh and for resident senior citizens is proposed to be increased from Rs 2.5 lakh to Rs 3 lakh. No change is proposed in existing rates of surcharge and education cess.
Impact: The increased basic threshold limit will enable maximum tax savings up to Rs 5,665.
P: The maximum deduction limit under Section 80C is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.
I: This will enable maximum tax savings up to Rs 16,995 and encourage household savings and investments.
P: The maximum deduction limit in respect of interest on home loan for `self-occupied property' is proposed to be raised from Rs 1.5 lakh to Rs 2 lakh.
I: This will translate into maximum savings up to Rs 16,995. The condition that acquisition or construction of property should be completed within 3 years from the end of the financial year in which the loan was taken continues.
P: Unlisted securities and mutual funds (other than equity oriented) to qualify as `long-term capital asset' if held for more than 36 months (earlier limit: 12 months).
I: This may result in higher tax on sale of unlisted securities and mutual funds held for more than 12 months but up to 36 months. Earlier, such unlisted securities were taxable at the rate of 20% and such listed mutual funds were taxable at the rate of 10% without indexation (indexation is adjustment for cost of inflation) or at 20% with indexation, whichever is lower. In both the cases, now, the gains will be taxable at applicable slab rate.
P: Tax rate on sale of long-term listed mutual funds (other than equity-oriented mutual funds) is proposed to be increased from 10% to 20%.
I: Sale of listed mutual funds (other than equity-oriented mutual funds) held for a period of more than 36 months will be taxed at the rate of 20% with indexation.
Earlier, such gains were taxable at the rate of 10% without indexation or 20% with indexation, whichever lower.
P: Advance received and forfeited for transfer of a capital asset -such as an apartment -is proposed to be taxed as `other income'.
I: Advance received in the course of negotiations for transfer of a capital asset will be taxable as `other income' if such sum is forfeited and the negotiations do not result in actual transfer.
P: Annual limit for investment under Public Provident Fund (PPF) is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh.
I: This will encourage increased savings in PPF. Also, this will yield additional tax exempt interest income for the taxpayer. The overall limit available under section 80-C for certain categories of investments ¬ such as post office saving scheme, NSC et al (including PPF) will increase to 1.5 lakh.
P: Deduction for investment in New Pension Scheme (NPS) proposed for all private sector employees irrespective of the date of joining.
I: This will make the scheme more attractive for all employees, including those who joined their organization before January 1, 2004.
P: Exemption from tax on long term capital gains on sale of residential property or any other asset is proposed on re-investment in only one residential house in India.
I: This clarifies that the exemption will not be available in respect of re-investment made in more than one property and/or re-investment in property outside India.
P: Maximum tax exemption on longterm capital gains for total reinvestment in certain bonds is proposed to be capped at Rs 50 lakh.
I: This clarifies that the tax exemption will be limited to Rs 50 lakh even where re-investment in bonds is split between two different financial years.
P: It is proposed to calculate dividend distribution tax on `gross' dividend instead of `net' dividend.
I: This may lead to lower amount of actual dividend received by the share / mutual fund holder.
P: Employee Provident Fund and Pension Scheme Increase in threshold limit for mandatory coverage of employees, increase in monthly pension limit and introduction of `Uniform Account Number'.
I: The increase in threshold limit will require employees with monthly pay up to Rs 15,000 to mandatorily become members of Employee Provident Fund Scheme.
Earlier, such limit was set at Rs 6,500 per month. Also, employees covered under Employee Pension Scheme will receive a minimum monthly pension of Rs 1,000. The Provident Fund is also proposing to implement `Uniform Account Number' for employees which will allow portability of funds on change of employment.
2014: The Times of India’s guide: II
SPOT THE DEVIL THAT LURKS IN THE FINE PRINT
The Times of India Jul 11 2014
Lost in the maze of the budget papers is stuff that you should know about. Here are some illustrations: Be ready to share more from your dividend income with the government as the FM has proposed to increase the effective dividend distribution tax (DDT) rate even without announcing a specific increase! The Union Budget 2014 would change the manner of computation of DDT. Amount of distributable income and dividend which are actually received by shareholders/ unit holders need to be grossed up for the purpose of computing tax.
Failure to withhold tax at source against payments like salary or director fees will mean that such expenses are not allowed as a business deduction.
If you are planning to sell off your unlisted shares after holding them for a period of 12 months assuming that the gains would be treated as longterm capital gains and taxed at concessional rate of 20%, hold on! Although, the FM proposed that the period of holding of the listed mutual fund units would be increased from 12 months to 36 months, the budget has increased the holding period for unlisted shares as well.
While the FM didn't mention whether corporate social responsibility (CSR) expenditure would be allowed as a business deduction, the small print disallows such expenditure as a business deduction. Deduction is available only if the expenses fall under specific categories -such as repairs, depreciation, or towards certain notified projects.
In the budget speech, Jaitley announced service tax exemption on services provided by Indian tour operators in respect of tours outside India. The exemption is available only if a foreign tourist avails services of an Indian tour operator for foreign travel. Thus, your USbased cousin, who is on a trip to India and flies to Nepal for sightseeing, will be exempt from service tax. However, if you accompany him, be ready to cough up your share of service tax.
The FM has proposed legislative and administrative changes with an aim to realize the tax demand of more than Rs 4 lakh crore stuck in disputes and litigation. At the same time, keeping this whopping sum in mind, he announced some clever changes in the indirect tax laws. Now, if you have been served an order confirming the tax demand and you want to challenge it, please contact your banker to confirm your bank balance as the FM has suggested a mandatory pre deposit of 7.5% to 10% of total tax and penalty demand (with ceiling of Rs 10 crore) for filing the appeal.
Pandora's Box was opened in 2012 when the Supreme Court delivered one of the most talked about excise and taxation rul ings in the case of Fiat India Private Limited. The apex court held that in case of sale below cost of production, excise duty is to be paid on the normal price (based on competitor's price) Now, the impact of this judg ment has been negated by an amendment in the Central Ex cise Valuation Rules and excise duty is to be paid on the trans action value only. This wil benefit manufacturing sector.
Whilst the FM has tried to please the manufacturing and pipeline industry by offering investment-linked deduction in respect of the asset acquired or constructed to certain speci fied business in these industries he has also put a restriction that the asset has to be used in the said business for a period of 8 years from the year in which the asset is acquired or constructed Further, he has applied this re striction to the industries al ready covered in the said invest ment-linked deduction (such as companies setting up and oper ating a cold chain facility, ware housing facility, etc).
