At the outset, let me say that the following are just my incipient comments on the budget and the details would only be known once the fine print is digested.
No one with taxable income up to Rs 100,000 will be required to pay any income-tax any more. This proposal purports to give relief to 1.4 crore assessees out of 4 crore.
While everyone will file his return according to the current tax slabs and tax rates, and compute his taxable income and the tax payable, anyone with a taxable income of up to Rs 100,000 will have his income-tax liability automatically rebated.
There is a universal 2 per cent education cess applicable for all taxes across the board, including income-tax. This is over and above the already existing surcharge and will be applicable on the aggregate of income-tax and surcharge.
Family pension received by widows, children and nominated heirs of members of the armed forces and the paramilitary forces killed in the course of operational duties would be fully exempt from tax. While this move is laudable, one cant help but wonder why the exemption is not extended to even families of civilians.
Benefit of Section 80DD and Section 80U is made available to persons suffering from autism, cerebral palsy and multiple disability.
Agricultural land situated in certain urban agglomerations continues to fall under the definition of capital asset and the compensation for acquisition of such land is subject to capital gains tax. In cases where the compensation or the enhanced compensation has been received on or after April 1, 2004, the same would be exempt from tax. Now rich farmers can even become more rich.
Sometime back, we literally laid out the red carpet for our NRI diaspora. Now that our forex kitty is overflowing, we do not require their patronage. Ergo, NRE and FCNR deposits would no longer be tax-free.
Thankfully, gift tax continues to stay abolished. However, money laundering is sought to be curbed by making purported gifts from unrelated persons, above the threshold limit of Rs 25,000, taxable as income.
However, gifts received from blood relations, lineal ascendants and lineal descendants, and gifts received on certain occasions like marriage will continue to be totally exempt.
Long-term capital gains tax on securities stands abolished. The same is being replaced by a turnover tax, to be paid by the purchaser at 0.15 per cent. This tax is applicable even on futures and options.
Simultaneously, the short-term capital gains tax has been drastically reduced from 30 per cent to 10 per cent. This move seeks to put local players on a par with FIIs who used to use devices like the Mauritius route to evade capital gains tax. However, it remains to be seen whether this move actually benefits market players or not.
Also the question remains of those who have existing carried-forward long-term capital loss. This is because as per the existing provisions, carried-forward long-term capital loss can be only set-off against long-term capital gains. Short-term gains cannot be used in such cases.
Now, investors would necessarily have to incur some long-term gains, say in real estate etc., in order to be able to net off the carried-forward loss.
The primary reason for not allowing the netting off of long-term loss against short-term gains was on account of the fact that the short-term gains were taxed at a higher rate than the long-term gains. But now that there is no distinction, it is hoped that set-off would be freely available.
The exemption on dividends from equity mutual funds stays. This was anyway widely expected and in any case almost promised by the erstwhile finance minister.
The distribution tax on debt-based mutual funds stays the same for individuals and HUFs, while for corporates it has increased to 20 per cent.
Small savings rates remain untouched. There is a special savings scheme to be launched exclusively for senior citizens yielding 9 per cent per annum. The Varishta Bima Pension Yojna, which was also yielding 9 per cent, will stand discontinued.
This is little reason to cheer. The new savings scheme merely seeks to substitute something which existed anyway in terms of the Yojna. Moreover, the Yojna was available from age 55 onwards whereas the new scheme may be applicable only to senior citizens whom the act defines to be of age 65 and above. However, the details are awaited.
While bringing in some more services within the purview of service tax, it has been increased to 10 per cent from 8 per cent.