As the new Indian government prepares to present its maiden budget in July 2014, there is a lot of literature in the press. A word cloud may hover around that may include words like tax slabs, income tax rates, wealth tax, fiscal deficit and so on. The noise will only rise as we head closer to the day.
Here are 5 things you need to note as a taxpayer:
Here are 5 things you need to note as a taxpayer:
1. Income tax
Income tax is paid on the taxable income that is earned by an individual during a financial year. People with annual income up to Rs 2,00,000 pay no tax. The tax rate varies depending upon the income and as the income rises the rate of tax also rises for the individual. Those earning between Rs 2 to 5 lakh pay 10% while those earning between Rs 5 lakh to Rs 10 lakh annually pay 20%. The tax rate is 30% on people earning more than Rs 10,00,000 per annum. There is a demand to provide relief to the salaried middle-class by increasing the basic tax exemption limit to Rs 3,00,000 from the current Rs 2,00,000 per annum. This means income up to Rs 3,00,000 would be exempted from income tax.
Income tax is paid on the taxable income that is earned by an individual during a financial year. People with annual income up to Rs 2,00,000 pay no tax. The tax rate varies depending upon the income and as the income rises the rate of tax also rises for the individual. Those earning between Rs 2 to 5 lakh pay 10% while those earning between Rs 5 lakh to Rs 10 lakh annually pay 20%. The tax rate is 30% on people earning more than Rs 10,00,000 per annum. There is a demand to provide relief to the salaried middle-class by increasing the basic tax exemption limit to Rs 3,00,000 from the current Rs 2,00,000 per annum. This means income up to Rs 3,00,000 would be exempted from income tax.
2. Indirect tax
While income tax you pay directly, there are a host of indirect taxes you pay for goods and services that you buy. So when the budget announces a change in the excise duty for cars, price of cars applicable to you changes. This is because car makers pass on the increase or decrease in taxes to you. The same thing applies to electronic goods that you buy or import. The government needs to increase the tax revenue due to the rising gap between its income and expenditure. Hence, do not expect prices of goods to fall soon.
While income tax you pay directly, there are a host of indirect taxes you pay for goods and services that you buy. So when the budget announces a change in the excise duty for cars, price of cars applicable to you changes. This is because car makers pass on the increase or decrease in taxes to you. The same thing applies to electronic goods that you buy or import. The government needs to increase the tax revenue due to the rising gap between its income and expenditure. Hence, do not expect prices of goods to fall soon.
3. Tax rebates and benefits
The government needs to encourage savings for retail investors to finance future growth. Currently, under section 80C, if you invest Rs 1,00,000 in public saving schemes, or equity-linked mutual funds or other designated investment schemes, you can claim deduction and save up to Rs 30,000 or 30% tax. In addition to this, you can claim deduction on your home loan interest rate of up to Rs 1,50,000 and save another Rs 45,000 in tax.
The government needs to encourage savings for retail investors to finance future growth. Currently, under section 80C, if you invest Rs 1,00,000 in public saving schemes, or equity-linked mutual funds or other designated investment schemes, you can claim deduction and save up to Rs 30,000 or 30% tax. In addition to this, you can claim deduction on your home loan interest rate of up to Rs 1,50,000 and save another Rs 45,000 in tax.
The government may increase these limits. However, considering the need to garner more tax revenue, do not expect too may rebates. If the Direct Tax Code is given the push, overall tax rates would be cut but these deductions could also be limited.
4. Tax returns
The budget could simplify the process of filing of returns further. A couple of years ago, the government gave a relief to salary earners up to Rs 5,00,000 per annum from filing of tax returns. However, it was clarified that everyone would have to file returns. The new government intends to simplify processes for ordinary people.
4. Tax returns
The budget could simplify the process of filing of returns further. A couple of years ago, the government gave a relief to salary earners up to Rs 5,00,000 per annum from filing of tax returns. However, it was clarified that everyone would have to file returns. The new government intends to simplify processes for ordinary people.
5. Expensive or cheap
A lot of goods and services get expensive or cheap after the budget. An all-round cut in taxes that makes your cars or refrigerators cheap is unlikely. The government needs more money to ‘balance’ the budget. Finance minister Arun Jaitley will try to cut expenditure and enhance revenue through taxation. Hence, there is very little possibility that things would get cheaper after the budget.
A lot of goods and services get expensive or cheap after the budget. An all-round cut in taxes that makes your cars or refrigerators cheap is unlikely. The government needs more money to ‘balance’ the budget. Finance minister Arun Jaitley will try to cut expenditure and enhance revenue through taxation. Hence, there is very little possibility that things would get cheaper after the budget.
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