Although businessmen and professionals are entitled to various deductions while computing their taxable incomes, the salaried class hardly has any such avenues, other than investment-linked reliefs.
Following are the Pros and Cons of the Budget 2016-
- As per the Finance Bill 2016, Though IT exemption slabs remained unchanged, our Government has increased the House Rent deduction limit under section 80GG to Rs 60,000 per annum from the current deduction of Rs 24,000 on the housing the rent. This will affect the Non-salaried employees or the salaried employees who are not in receipt of any House Rent Allowance as a part of their Salary Income.
The Salaried individuals who are getting HRA as part of salary and claiming deduction of rent paid from salary income under section 10 are not affected by this proposed change in tax law.
- The Bill also proposed to raise the ceiling of tax rebate under 87A from Rs 2,000 to Rs 5,000 i.e individuals will get an additional tax liability relief of Rs. 3000.
- Moving towards a pensioned society, withdrawal up to 40 per cent 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 per cent of corpus to be tax free will apply in respect of corpus created out of contributions made on or from 1.4.2016. Limit for contribution of employer in recognized Provident and Superannuation Fund of Rs 1.5 lakh per annum for taking tax benefit. Exemption from service tax for Annuity services provided by NPS and Services provided by EPFO to employees.
Reduce service tax on Single premium Annuity (Insurance) Policies from 3.5 per cent to 1.4 per cent of the premium paid in certain cases.
- An additional deduction of interest on Home Loan under section 80EE for interest of Rs50,000 per annum for loans up to Rs35 lakh sanctioned in 2016-17 for first time home buyers, i.e they do not own any house property at the time of sanction of loan, where house cost does not exceed Rs 50 lakh.
- The budget has also proposed to increase the threshold for deducting tax deducted at source (TDS) on payment of accumulated balance due to an employee in EPF Rs 50,000 from existing Rs 30,000.
Last year budget had provided that the members of private provident fund trusts will not have to pay tax on pre-mature withdrawals provided the amount is either less than Rs 30,000 or their tax liability is nil even after including the withdrawn sum to their income.
- To bring about parity in New Pension Scheme and other retirement schemes, the government has decided to impose tax at the time of withdrawal on 60% of the contributions made after April 1, 2016, to EPF and other schemes. Till now withdrawal of EPF corpus after 5 years of continuous service was fully tax exempt. The new provisions indicates that if the EPF is not used for buying an annuity then 60% of that portion of the corpus which is built from the employee contributions made w.e.f 1.4.2016 would be taxable.
For More Details about imposition of Tax
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