Most often, while conspicuous changes in the budgets are lauded or criticised, some of the fineprint is overlooked. This time too, some of the less-noticeable changes that can affect the wealth of individuals received little attention.
No plans to remove Securities Transaction Tax: Govt
While the removal of surcharge for individuals may be showcased as a big positive, it only comes as a disappointment for individuals earning less than Rs 10 lakh as they gain nothing from the move. Except for an increase in the basic exemption limit by Rs 10,000, the Budget did not come up with the much expected change in Section 80C (deduction made for certain investments). Further an anticipated enhancement in the limit for claiming deduction for interest on home loan was also left untouched. While these were expectations not met, some benefits too have been withdrawn. Here are some of the proposed changes that missed the headlines.
TDS: If you are an individual having income and yet to apply for Permanent Account Number (PAN), your tax liability is likely to be at 20 per cent of the income receivable. Any person entitled to receive any sum or income on which tax is deductible at source has to furnish his PAN to the payer of such income; failing which tax would be deducted at the higher of the following rates – at the rate specified in the relevant provision or at the rate or rates in force or at rate of 20 per cent. In the new regulation NRIs have to apply for PAN to avoid higher tax incidence. This will have effect from April 1, 2010.
Tax deduction at source: Quoting PAN will entail lower rate
Deduction for disabled: The Finance Minister has been kind towards the severely disabled and extended the exemption limit availed under Section 80DD from Rs 75,000 to Rs 1 lakh. Deduction under this section is available to an individual who incurs any expenditure for medical treatment of disabled dependent.
The amendment will be made effective from April 2010 and will accordingly apply in respect of assessment year 2010-11. However, the limit for ordinary disability is left unchanged at Rs 50,000.
No service tax on legal outfits working as proprietorships
Gift tax: Movable and immovable properties are back in the gift tax net. Currently, cash received in excess of Rs 50,000 from non-relatives are taxed as income from other sources. Henceforth, any immovable property received without consideration and where the stamp duty value of the such a property exceed Rs 50,000 will be taxed as income from other sources (income being the stamp duty value).
The proposed change will also cover movable property such as jewellery, artifacts, shares and securities and drawings.
Changing choice for tax saving investments
Wealth tax: The Finance Minister has proposed a change in the Wealth Tax Act. Accordingly the basic exemption limit is enhanced from Rs 15 lakh to Rs 30 lakh. The hike is to provide for inflation. The proposed amendment will apply on the valuation of net wealth as on March 31, 2010. The current limit of Rs 15 lakh was fixed in 1992 for individuals, HUFs and companies. Wealth beyond this limit was so far charged at a rate of 1 per cent.
Education Loan: It is proposed to introduce full interest subsidy (during the moratorium period) for education loans taken by economically weaker sections to provide access to higher education. It will cover loans taken by such students from scheduled banks to pursue any approved courses of study, in technical and professional streams from recognised institutions in India. However, the scheme will be applicable for students whose family income is less than Rs 4.5 lakh a year.
'Tax relief likely to boost commodity trading'
This apart, the scope of Section 80 E (which provides for deduction of interest paid on education loans) has been extended to cover all fields of studies, including vocational streams pursued after passing the senior secondary examination or its equivalent from any recognised school, board or university. This amendment will take effect from April 1, 2010, and will apply in relation to assessment year 2010-11.
Donations to charity: Donations made for funding the flood relief work in Bihar and other public purposes were not entitled for deduction in respect of donation under Section 80G. The Finance Minister has now decided to grant a one-time waiver for such donations paid during 2008-09. Individuals who have donated can now benefit from this deduction while filing returns for the assessment year 2009-10.
VRS and termination: Under a voluntary retirement scheme employees enjoyed an exemption of up to Rs 5 lakh on the lump sum received under section 10 (10C). They also enjoyed the benefits of Section 89, which allowed them to spread the arrears backward, as well as carry advances forward, in order to reduce the tax burden in a given year. The Budget has decided to do away with this double benefit and inserted a clause in Section 89 that does not allow the benefits under Section 10(10C) if the former is opted for.
This amendment will take effect from April 1, 2010, and will apply in relation to assessment year 2010-11 and subsequent years.
Fringe benefit tax: The Budget has proposed to abolish FBT in the hands of employer. While this is being showcased as a positive, a proposal to tax the fringe benefits as perquisites in the hands of the employees is likely to dent the benefit of the above.
Perquisites such as reimbursement of credit cards expenses, free accommodation and motorcar provided by the employer and contribution to superannuation paid in excess of Rs 1 lakh by the employer may now be taxable in the hands of employee.
Advance tax: With a view of providing some relief from inflation, it has been proposed to raise the tax threshold limit for payment of advance tax from Rs 5,000 to Rs 10,000. The proposed amendment will take effect from April 1, 2009.
Interest income: The Budget also proposes to amend section 145A to treat the interest received by an assessee on compensation or enhanced compensation as income for the year in which it is received irrespective of the accounting standard followed by the assessee. Such income will be assessed as "income from other sources". This amendment will take effect from April 1, 2010.
A deduction of 50 per cent on such amount is allowed before calculating the taxable income.
Gains from business: It is proposed to expand the scope of presumptive taxation to all businesses by substituting a new section 44 AD in place of section 44AD, section 44AE and section 44AF which prescribed the calculation of tax in case of certain businesses. The proposed scheme will be applicable to individual, HUFs and partnership firms excluding the Limited Liability Partnership.
The new scheme excludes assessees who are availing deduction under section 10A, 10AA, 10B and 10BA or any provision of Chapter VI A (under heading "C" deduction in respective of certain income). The scheme is applicable for any business (other than business coverd by Section 44AE) which has gross turnover or gross receipts of Rs 40 lakh. The presumptive rate of income is prescribed at 8 per cent of such receipts. Such assesses would be exempt from advance tax and maintenance of books.
