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The common man, already bent under the burden of rising prices, and a strained household budget waited for the Finance Minister to step in with the Budget and offer some respite. Shattering the expectations of the aam aadmi, the Finance Minister has retained the tax slabs and the tax rates as were applicable to the last assessment year.
However, he has allowed a marginal tax relief of up to Rs 2,060 for individuals with taxable income up to Rs 5 lakh. Tax payers with taxable income up to Rs 2,20,000 will not pay any taxes while a tax payer who was earlier paying tax of Rs 30,900 on an income of Rs 5,00,000 will now pay Rs 28,840 instead. The meagre savings of less than Rs 170 per month will quite easily vanish in the upward spiral of rising prices.
Nonetheless, tax payers chasing the ever evasive dream of owning a house have reason to cheer. In an attempt to promote house ownership, an additional deduction of Rs 1 lakh has been proposed for first-time home buyers in respect of interest on housing loans taken during the year April 2013 to March 2014 where the loan amount does not exceed Rs 25 lakh and the value of the property does not exceed Rs 40 lakh. This deduction will be in addition to the deduction of Rs 1, 50,000 available for interest on housing loan in respect of a self-occupied house property. The maximum deduction that can be claimed in assessment year 2014-2015 and 2015-2016 is Rs 1 lakh. Hence, if a person pays an interest of Rs 2,00,000 each during the assessment years 2014-2015 and 2015-2016, then, in addition to the deduction of Rs 1,50,000 already available to him in each year, he will get an additional deduction of Rs 50,000 in each year. Though tax payers in metros may never qualify for the deduction given the mounting real estate prices, tax payers in tier II, III and IV cities may benefit from the additional deduction.
The Rajiv Gandhi Equity Saving Scheme (RGESS) was introduced last year and a first-time investor was allowed a deduction up to Rs 25,000 from his taxable income for an investment of up to Rs 50,000 made by him in eligible listed equity shares under the scheme. Only tax payers with gross total income not exceeding Rs 10 lakh were eligible for the deduction.
In a bid to lure new retail investors into the capital market, the Finance Minister has now added some sheen to the deduction for investments made under the RGESS. The benefit of the deduction will now be extended to taxpayers with gross total income up to Rs 12 lakh. Investors under the scheme will now be allowed to invest in listed units of equity oriented funds in addition to listed equity shares. Further, the deduction can now be claimed for 3 consecutive years instead of only the first year of investment. Tax payers with a gross total income up to Rs12 lakh thus have reason to celebrate. They have an additional tax saving avenue in addition to the usual tax savings instruments such as LIC, PPF, if they start investing in the capital market through the RGESS.
Until now, there was no requirement to deduct tax from the consideration paid to a resident for transfer of an immovable property. The Finance Minister has proposed that transfer of immovable properties (other than agricultural properties) should attract TDS @ 1 per cent where the consideration for the transfer exceeds Rs 50 lakh. This will lead to administrative hassles for both, the transferor and the transferee. The transferee will be required to deduct and deposit the tax and comply with the filing requirements to report the tax deducted. The transferor will have the additional burden of filing a tax return and claiming the credit for the TDS, if he is not already filing a tax return.
As widely expected, the super-rich tax payer, with taxable income exceeding Rs 1 crore, will now pay a surcharge of 10 per cent for AY 2014-2015. The maximum effective tax rate for such an individual would be 34 per cent. This surcharge has been proposed for one year only. Till last year, there was no facility for e-filing of wealth tax returns. The returns had to be filed in paper form together with the relevant annexures. E-filing has now been extended to wealth tax returns as well.
Mousami Nagarsenkar is Manager and Bhavin Rajput is Deputy Manager at Deloitte Haskins & Sells
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