The budget wasn’t as big a deal as we might have expected but there are a few things we have to note:
You have a lot more taxes.
Nothing happened to tax slabs. They’re still at
- Less than 2.5 lakh: no tax
- 2.5L to 5L: 10%
- 5L to 10L: 20%
- >10L: 30%
If your income is less than 5L, you got a rebate of Rs. 2000 (you had to pay that much less). Now, that’s up to Rs. 5,000. Won’t apply if your income is higher.
Then there’s a 3% cess. Okay, it gets worse from here:
15% surcharge if you get more than a crore in income
Last year there was 12% surcharge on income of more than Rs. 1 crore. That has been raised to 15%, which takes the highest tax rate to 34.5% (30% plus 15% of 30%), and then there’s 3% further cess on this. It’s just bad to be rich.
EPF gets taxed now
The exits from Employee Provident funds and superannuation funds weren’t taxed. Now, only for contributions after 1 April 2016, you will be taxed; basically 60% of your corpus (of amounts put in after April 1) will be added to your taxable income. (More in a separate post)
Dividend Taxed if you get more than 10 lakh
Dividend is taxed at source so you don’t pay it when you get divided. But now if you make more than Rs. 10 lakh in dividend, you will pay an additional tax of 10%. This isn’t added to your income, you just pay 10%. (Read this post)
Service Tax Increased to 15%
The good thing is: At least it’s not 16%. Another random cess has been added to push it up from 14.5% to 15%. Booyah.
Vehicles: Pay a Pollution Cess
Any new vehicles bought anytime after today. Small petrol cars (1%), Medium cars or diesel cars (2.5%), SUVs and others (4%). Applies to everything except taxis, 3 wheelers, hybrids etc. (More coming up on this)
Higher Option STT: 0.05%
Options are the biggest traded set in the NSE, and current Securities Transaction Tax is 0.017%. This is now moved up to 0.05%, a 3x Increase. For an average Nifty option bought at Rs. 1000, a full lot of 75 will still pay only Rs. 3-4 as STT, so this is not much. But more is more!
An Equalization Levy for Companies, of 6%
If you buy services from abroad you will pay 6% extra as an “equalization” levy. This applies to businesses (and to people who have business income).
Buying a 10 lakh rupee (or more) vehicle? Pay 1% more as Tax
If you pay Rs. 10 lakh rupees (in cash or cheque or otherwise) you will pay 1% more as a tax that will be paid as a “TCS” of sorts. The 1% is available to offset against other tax payable later, but you’ll pay that 1% when you buy the car.
Deductions will be reduced, New Co Tax Rates at 25%
Deductions such as accelerated depreciation, investment linked deductions etc. will be reduced. (More on this later). But this also should have meant lower 25% rates for companies, but not all companies will get the lower rate – only new companies, in the manufacturing sector, created after 1 April 2016, get to pay 25% tax on profits. For the rest, there’s 30%++ that continues.
Oh, there’s some interesting things as well:
Another Amnesty Scheme
You can declare your “black” income and pay 45% tax on it as a penalty, and you get a full waiver on past sins.
Higher Rent Deduction for Professionals
Non salaried people who don’t get HRA can now deduct a rent of Rs. 60,000 (if they pay rent and don’t own a house). This is good.
No Service Tax for Regulatory Fees
You don’t need to pay the 14.5% (now 15%) on RBI/SEBI/IRDA fees, if they apply to you.
Lower Cost Housing Loans – Get Rs. 50,000 more off
If you take a loan next year for a house worth 50 lakh or less (loan value of Rs. 35 lakh or less) you get another Rs. 50,000 off on the interest paid. There’s some more on this that we’ll write about too.
Overall, there’s a lot more in the budget but the theme for the individual is: we’ll pay a lot more tax.
