- May 2014
- December 2013
Ruby Jacob, 12 Mar 2013
In the days running up to the Union Budget almost every financial news website and blog was crowded with speculations on what changes the FM would make in tax for 2013-14. Most experts did not expect any change in the tax slabs but guessed that he'd levy additional taxes on the super-rich and most likely introduce some new taxes for property.
Though tax slabs were untouched the Finance Bill has proposed other changes in taxes which you should know about since they will ultimately trickle down to your household purse strings as well.
Changes in Income Tax for 2013-14
FM Chidambaram had hinted he likes stable tax regime. So there is absolutely no change in current income tax slabs or rates because they were introduced just last year. But there is a small relief or those in the first bracket of Rs 2 lakhs to Rs 5 lakhs. You would get an income tax credit of Rs 2000 this year. What this means is if your income is less than Rs 5 lakhs and your tax liability is Rs 15,000 you have to pay Rs 13,000 as tax.
For those whose income is above Rs 1 crore taxes have been raised- though not by the slabs. There will be an additional surcharge of 10% on their income over Rs 1 crore for one year. This is not expected to inconvenience many since- you heard the FM's comment- there are only 42,800 crorepatis in India! What he meant is only so many Richie Richs have declared their true income.
There are no major changes in income tax deductions for 2013-14 except in case of RGESS, new home loan and life insurance premiums.
From April 2013 if you buy real estate worth over Rs 50 lakhs you'd have to deduct tax on the sale value and pay to the government. TDS at the rate of 1% will be applicable on immovable property transactions.
Property transactions are plagued with malpractices. PAN of parties involved is not mentioned and many times the property sale deed is left unregistered and undervalued. Making TDS mandatory would go some way in reporting of property transactions and also in taxation of capital gains on sale.
Dividend option of debt funds less profitable now
Dividend distribution tax (DDT) on debt mutual funds has been raised from 12.5% to 25%. DDT on Liquid and Money Market funds have been raised from 25% to 30%. Since this is applicable only in case where dividends are declared, you will not be affected if you choose growth option in all debt funds. Though you do not directly pay this- the mutual fund that pays dividend does- they deduct it from your dividend before paying it out.
Securities transaction tax (STT) on equity funds has been lowered. STT is now 0.001%. You pay this while redeeming units.
Fine dining, cell phones, set top boxes more expensive
Eating out at A/C restaurants is going to empty your purses sooner. All A/C restaurants will charge 4.2% more on the bill for service tax. Earlier service tax was charged only by those serving liquor. There is no change in existing service tax rates.
On mobile phones costing above Rs 2000 you have to shell out 6% as excise duty instead of earlier 1%. Duty on Set Top boxes has been doubled from 5% to 10%. Duty on imported silk will go up by 10%. Clothes having imported silk in it will cost more. Customs on these 2 items have been increased to protect and promote their desi variants.
Pay and park services have been brought under services being charged service tax. Excise duty on SUVs has gone up by 3% to 30%. SUV taxis have been spared the hike.
Service tax on houses and flats having carpet area more than 2000 sq ft has been increased from 3.09% to 3.71%. If you were planning to marble your floor, excise duty rate on marble has been doubled from Rs 30 per sq mt to Rs 60 sq mt.
Cigarettes, as usual, have seen a specific excise duty hike of about 18%. Similar hike has been proposed on cigars, cheroots and cigarillos.
Customs duty on imported cars, yachts and bikes have all gone up significantly. Imported luxury cars costing over $40,000 will attract 100% tax as against 75%. Imported bikes of engine capacity over 800 cc will be charged 75% tax, up by 15%.
Few things are cheaper too
Yes, duty on certain stuff has been lowered. You can afford to splurge more on clothes and footwear since ready garments are set to get a little cheaper. Machinery for manufacturing leather goods will also see a small reduction in duty.
Handmade carpets and textile floor coverings of jute and coir would have zero excise duty so hopefully those will get cheaper too.
If you like to wear gems, this is your time. Duty on pre-forms of precious and semi-precious stones has been cut from 10% to 2%. That's probably the biggest duty cut this year.
You can get more duty-free gold jewelry to India from this year. For male passengers the limit has been raised to Rs 50,000 and for female passengers it is Rs 1 lakh.