Citizens' Issues
Luxury cars to become costlier
New Delhi : Union Finance Minister Arun Jaitley here on Monday announced that an additional 1 percent tax will be imposed on cars valued at above Rs.10 lakh.
 
“I also propose to collect tax at source at the rate of 1 percent on purchase of luxury cars exceeding value of Rs.10 lakh,” Jaitley said while presenting the national budget for 2016-17 in the Lok Sabha.
 
“I propose to levy an infrastructure cess, of 1 percent on small petrol, LPG, CNG cars, 2.5 percent on diesel cars of certain capacity and 4 percent on other higher engine capacity vehicles and SUVs,” Jaitle said while expressing the government's concern over pollution and traffic situation in cities.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Budget 2016: How it will affect your personal finances
Tax on PF withdrawals of new contributions, tax deduction of interest on home loans and relief to those who live in rented houses
 
Individuals who contribute to the National Pension System (NPS) scheme will be happy to know that withdrawal up to 40% of the corpus at the time of retirement will be tax exempt. At the time of retirement, NPS subscriber can withdraw 60% of the corpus and invest the remaining 40% in an annuity. Earlier, the entire corpus, which can be withdrawn (60%) was subject to tax. The subscriber can now withdraw 40% of the corpus as tax exempt. The remaining 20% of the corpus, when withdrawn will be subject to tax. These same provisions shall apply to superannuation funds and recognized provident funds, including the employee’s provident fund (EPF). For these schemes, the same norm of 40% of corpus to be tax-free will apply in respect of corpus created out of contributions made on or from 1 April 2016.
 
Employer contribution to PF restricted to Rs1.5 lakh
Contributions made by employer to the credit of an employee participating in a recognised provident fund, which are in excess of 12% of the salary of the employee, are liable to tax in the hands of the employee. However, there is no monetary limit for the contribution made by the employer, though there is a monetary ceiling for employee's contribution (Rs1.50 lakh). Therefore, in order to bring parity in the monetary limit for contribution by the employer and the employee, employer contribution under pension schemes will now be limited to Rs1.50 lakh, without attracting tax. Contributions above Rs1.50 lakh will attract tax.
 
Affordable home: Additional deduction on interest
With a view to incentivise affordable housing sector, there will be a deduction for additional interest of Rs50,000 per annum for loans up to Rs35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed Rs50 lakh. This will be over and above the Rs2 lakh limit provided for a self-occupied property under section 24 of the Income Tax Act.
 
Rebate increase for individuals earning less than Rs5 lakh
With the objective to provide relief to resident individuals in the lower income slab, it is proposed to amend section 87A so as to increase the maximum amount of rebate, for individuals with income up to Rs5 lakh, to Rs5,000 from existing Rs2,000. To provide relief to those who live in rented houses, the limit of deduction of rent paid under section 80GG from Rs24,000 per annum to Rs60,000.
 
Below are the highlights of how the budget will affect your personal finances:
  1. Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of Rs10 lakh per annum
  2. Surcharge to be raised from 12% to 15% on persons, other than companies, firms and cooperative societies having income above Rs1 crore.
  3. Deduction for additional interest of Rs50,000 per annum for loans up to Rs35 lakh sanctioned in 2016-17 for first time home buyers, where house cost does not exceed Rs50 lakh
  4. Increase in time period to five years from three years for acquisition or construction of self-occupied house property for claiming deduction of interest u/s 24
  5. Any redemption of Sovereign Gold Bond, by an individual shall not be treated as transfer and therefore shall be exempt from tax on capital gains. It is also proposed to amend section 48 of the Income-tax Act, so as to provide indexation benefits to long terms capital gains arising on transfer of Sovereign Gold Bond
  6. Extension of tax provision provided in case of mutual fund plan mergers. Any transfer by a unit holder in to the consolidated scheme of the mutual fund is not chargeable to tax.
  7. Increase the limit of deduction of rent paid under section 80GG from Rs24,000 per annum to Rs60,000, to provide relief to those who live in rented houses.
  8. Interest on Deposit Certificates issued under the Gold Monetisation Scheme, shall be exempt from income-tax
  9. Raise the ceiling of tax rebate under section 87A from Rs2,000 to Rs5,000 to lessen tax burden on individuals with income up to Rs5 lakh
  10. Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Declarants will have immunity from prosecution
  11. Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS). Annuity fund which goes to legal heir will not be taxable. In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made on or from 1 April 2016.
  12. Government will pay contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment
  13. Reduce service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid in certain cases
  14. Krishi Kalyan Cess, @ 0.5% on all taxable services, w.e.f. 1 June 2016
  15. 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
  16. Excise duties on various tobacco products other than beedi raised by about 10 to 15%

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COMMENTS

Sunil Aggarwal

9 months ago

With so many taxes and restrictions on EPF and PPF, it is best to go for equity which is spared as of now.

Sudheer M

9 months ago

FM has silently increased the service tax by another 50 basis points by introducing Krishi Kalyan Cess. So, now the service tax is 15% w.e.f 01st June 2016.
Indirectly, the common man suffers due to all these cess. The money collected specifically for a purpose, be it Swachh Bharat or Krishi Kalyan, we have the right to know how much is collected and how it is spent.

Mr FM and Mr PM, I am disappointed with this budget.

MG Warrier

9 months ago

With reference to “Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS). Annuity fund which goes to legal heir will not be taxable. In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made on or from 1 April 2016.”
This is a pathetic effort to market NPS. NPS suffers from several uncertainties and deficiencies (Ref; Chapter 10.3 of VII CPC Report) and best way to save it from causing further damage to those who have been forced to become part of the scheme is to merge NPS with the pension scheme administered by EPFO. Here, just because a scheme(NPS) has been introduced to deny the benefits of Defined Benefit Pension Scheme/s to ‘future’ employees, features of other retirement plans are being disturbed to make NPS attractive in comparison.

Dr Anantha K Ramdas

9 months ago

The FM forgot a few important things based on the oft spoken "Make in India" theme: it would have made sense to either impose substantial duty on radial and other vehicle tyres that are imported from China and made it mandatory for Indian manufacturers to make them here at home.

In a similar fashion, he ought to have ensured some taxation benefit to iron ore miners in the country provided they supplied these to Indian manufacturers of steel and other related products so as to encourage domestic production. He ought to have similarly imposed high duty on steel imports.

Sorry, FM, it is a disappointing budget!

Dr Anantha K Ramdas

9 months ago

The FM forgot a few important things based on the oft spoken "Make in India" theme: it would have made sense to either impose substantial duty on radial and other vehicle tyres that are imported from China and made it mandatory for Indian manufacturers to make them here at home.

In a similar fashion, he ought to have ensured some taxation benefit to iron ore miners in the country provided they supplied these to Indian manufacturers of steel and other related products so as to encourage domestic production. He ought to have similarly imposed high duty on steel imports.

Sorry, FM, it is a disappointing budget!

Anand Vaidya

9 months ago

Does the 40% tax upon withdrawal apply to PPF also? Please clarify

REPLY

Balwant Jain

In Reply to Anand Vaidya 9 months ago

not yet

Jaitley allots Rs.25,000 crore for state-run banks' recapitalisation
New Delhi : Continuing government efforts to deal with the high levels of non-performing assets (NPAs), or bad debts, of state-run banks, Finance Minister Arun Jaitley on Monday allocated Rs.25,000 crore towards their recapitalisation in the next fiscal.
 
He made the announcement while presenting in parliament the union budget proposals for the next fiscal. 
 
Jaitley plans to provide Rs.25,000 crore capital each in the current and next fiscal years, while Rs.20,000 crore would be provided during 2017-18 and 2018-19. 
 
In July last, the government had presented to parliament a supplementary demand for grants to provide for Rs.12,000 crore towards recapitalisation of public sector banks (PSBs).
 
The Rs.25,000 crore this year are being provided through three tranches.
 
Around 40 percent of the amount is to be given to those banks which require support, and all PSBs will be brought to the level of at least 7.5 percent core capital by the end of fiscal 2016, the finance ministry has said.
 
In the second tranche, 40 percent of capital is to be allocated to State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and IDBI Bank.
 
The remaining 20 percent is to be allocated to the banks based on their performance during the three quarters in the current year.
 
As per estimates, PSBs would need additional capital of up to Rs.240,000 crore by 2018 to meet the Basel III capital adequacy norms, put in place to guard against a repeat of the situation following the 2008 US financial crisis.
 
The quantum of exposure of Indian scheduled banks in terms of gross non-productive assets, re-cast loans and write-offs was Rs.9.5 lakh crore as of September last year.
 
Meanwhile, the government on Sunday named former comptroller and auditor general Vinod Rai has been named the first chairman of the Banks Board Bureau that will give advice on how to recover the bad loans of state-run banks.
 
The members co-opted to the board are Anil K. Khandelwal, former chair of Bank of Baroda, H.N. Sinor, former joint managing director of ICICI Bank and Rupa Kudwa, former managing director and chief executive of Crisil.
 
Taking the first step towards a holding company structure for state-run banks, the government, in August last, announced the setting up of a Banks Board Bureau (BBB) that will recommend appointment of directors in PSBs and advise on ways of raising funds and dealing with stressed assets.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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