If you are salaried and had high hopes pinned on this year’s Budget – be ready to swallow the bitter pill. Besides increasing the service tax rate to 15% by adding a Krishi Kalyan cess of 0.5% to existing 14.5%, there are higher taxes in store.
Before we begin to talk about hard measures, here is some good news,
- In increase in rebate under section 87A to Rs 5,000 from existing Rs 2,000
- Additionally those who do not get HRA, could claim maximum exemption of only Rs 24,000 per annum. This was allowed under section 80GG. In the current budget this limit has been enhanced to Rs 60,000 pa.
- First time home buyers can avail additional deduction of Rs 50,000. Loan must be sanctioned between 1st April 2016 to 31st March 2017 and be compulsorily taken from a financial institution. Also, the value of the property must be less than 50Lakhs and home loan must be less than 35lakhs. This is a modified version of Section 80EE.
Want to check your impact on taxes – use our calculator for Budget 2016 here.
Now the bad news –
- Only 40% of withdrawals from EPF shall be exempt from tax. Earlier withdrawal after 5 years were 100% tax exempt. Now 60% have been made taxable. This is applicable to accumulations in EPF starting 1st April 2016. This will make the much loved EPF an unattractive product in the market. And will be a major disappointment to the salarie.
While NPS has been granted exemption of 40% at the time of withdrawal in this budget; these products have in effect been brought at par as retirement options. The government will now make these optional; one will be allowed an option to choose their retirement product.
- Those who earn dividend income in excess of Rs 10lakhs will have to pay 10% tax on dividend income.
- TDS of 1% on purchase of luxury cars of over Rs 10lakhs
Catch all the budget updates on our page here.
Tell us what you think of this Budget, we’d love to hear your thoughts!