Decoding of Union Budget 2015-16 for Common Man: Is it really SABKA Budget APNA Budget?

Introduction:

Union Budget 2015-16 is promoted like, it is fulfilling wishes of every common people. The Government has presented this budget like “SABKA Budget, APNA Budget” and explained that, wishes of everyone like householder, farmer, youth, senior citizen, and entrepreneur will be fulfilled by this. The Government has projected the Union Budget 2015 as step towards attaining the ultimate goal of accomplishing Achche Din for Aam Aadmi (Common man) of India.

A lot was expected from the Honorable Finance Minister when he rose to present the budget of the Union for the year 2015-16 on February 28, 2015. Expectations were riding high and it was believed that budget will focus on growth and investments and will provide assistance to common man from inflation, increase in tax slabs was highly expected.

However, there is no alteration in the income tax slabs, only some additional deductions are been introduced in the budget. Now, everyone is thinking that whether it is really APNA Budget or shaking pockets of common man to balance the fiscal deficit and losses of the country.

Sight of Modi’s Government towards Budget:

In line with a goal of nation building, the Government of India has also been committed to start up various policies to uplift the economic structure of India.

Pitching for ‘Big Bang’ reforms, the Government is trying to improve business environment by making regulations and taxes less onerous to help push growth to 8.1-8.5 % next fiscal and to double digits in the coming years. India has reached a sweet spot and there is scope for Big Bang reforms now. Many new initiatives were announced and the thrust was majorly on Infra, Make in India and job creation. 

Is there something for Aam Aadmi?

Following are the key features for common man from the Union Budget 2015:

1.     Increment in  threshold for deduction in respect of health insurance premium

The continuously rising cost of medical expenditure has now caught the eye of the Government, as it doled out an increased tax benefit under section 80D. Section 80D i.e. Health Insurance premium increased to Rs. 25000 (Previously it was Rs.15000). In case of Senior citizen limit increased to Rs.30000 (Previously it was Rs.20000).

Furthermore, One good thing is that most of the very senior citizen who are above 80 years was unable to get benefit of this section because Insurance Company not cover their insurance so for those Senior Citizen who are not covered by health insurance to be allowed deduction of Rs.30000 towards medical expenditures.

2.     Interest from Sukanaya Samriddhi Scheme to be tax free

Sukanya Samriddhi Scheme was introduced in January 15 by the Hon’ble Prime Minister in his endeavor towards Beti Bachao Beti Padhao. The scheme was aimed at encouraging savings for a girl child’s education and marriage. At present, investment under Sukanya Samriddhi Scheme is already eligible for deduction under Section 80C.

It is now proposed that all payments to be made to recipients, including interest payments and withdrawals from the account under the scheme, would be fully exempt. This amendment is proposed to be effective retrospectively from 1 April 2015.

1.     80DDB: Easing the norms for claiming deduction on treatment of specified diseases

It is proposed to remove the requirement of obtaining a certificate from a Government doctor and now allows the deduction to the taxpayer on the basis of prescription, from a specialist doctor under section 80DDB.

The corresponding limit has also been increased to Rs. 80,000 for very senior citizens, while the overall ceiling for others categories remains unchanged.

2.     80DD: Increase in limits for deduction for disable persons

In view of the rising cost of medical care and special needs of a disabled person, it is proposed to amend section 80DD and section 80U so as to raise the limit of deduction in respect of a person with a disability from Rs. 50,000 to Rs. 75,000.

It is also proposed to raise the limit of deduction in respect of a person with severe disability from Rs. 1 lakh to Rs. 1.25 lakhs.

3.     Higher threshold for deduction towards contribution to pension funds

With an agenda to promote social security measures and to bring the existing provision in line with the recently increased overall limit of Rs. 150,000, the deduction for contribution to certain pension funds under section 80CCC has been increased to Rs. 150,000 from present Rs. 100,000.

Also, an additional deduction under section 80CCD to the extent of Rs. 50,000 has been introduced for contributions under the National Pension Scheme.

Dear common man you have to spend more for your pension to get tax saving today. Government is much concerned about retirement of peoples.

4.     Relaxation in TAN requirements

The burdensome requirement of obtaining/quoting a TAN by an individual (not liable to audit under section 44AB) in respect of his one-time transactions has been proposed to be discontinued in respect of notified deductors or collectors.

This shall reduce procedural requirements on part of an individual and ease his burden. Similar provisions already exist under section 194-IA in respect of transactions for purchases of immovable property from an Indian resident.

5.     Wealth tax abolished

The waning law on taxation of wealth has been proposed to be abolished. The Finance Minister has mentioned that the collection of wealth tax is more costly affair than collecting it. The detail furnished under the Return of Wealth still seems useful and so the Government has proposed to include the disclosure of details of assets as part of the Income Tax Return.

6.     Increase in surcharge on the super-rich

The revenue loss on the abolition of the Wealth Tax Act has been proposed to be compensated with an increased surcharge on the super-rich taxpayer (i.e. a taxpayer having a total income in excess of Rs. 1 crore). Super-rich taxpayers shall be liable to an increased surcharge of 12% in the event that their total income exceeds Rs. 1 crore, which shall be subject to the marginal relief available.

7.     Increase in travel allowance

The long due increment in the monthly travel allowance has now finally materialized. In order to commensurate with the increased costs of transportation, it is now proposed to be double the original transport allowance and it shall stand at Rs. 1,600 per month.

Heartily thanks to finance minister for looking towards these old limits but this joy would be complete only if they revised all limits i.e. Children education allowance, Uniform allowance, Hostel allowance etc. May be this items will be considered in next budget.

8.     Exempted Income:

Few items are listed in Section-10 Exempt Income. Amount received from maturity of Sukanya Scheme, Swacch Bharat abhiyan, Clean Ganga fund are not liable to tax.

Position of Aam Aadmi after Budget:

Service tax rate is proposed to increase from 12.36% to 14%.Further an enabling provision is made to empower the Central Government to impose a Swatch Bharat cess on all or certain taxable services at a rate of 2%.

Needless to say it will impact the middle class as essential services will become costlier.  An overall situation of Aam Aadmi is like:

·         How we give good education to our kids, as it now costs more.

·         Welcome to obese India, gym costs more.

·         IT enabled India is not for us, as internet and mobile cost more.

·         Debit and credit card costs more.

·         Trying to buy a house, forget about it, because you don’t have liquidity as your funds are stuck with deduction investment.

Whether this Budget is good for Aam Aadmi?

The FM promised 24-hour power, clean drinking water, toilets for all homes, at least one job for each household, connecting all habitations by all weather roads, electrifying all villages, good health and education facilities in every town and village. The deadline for these goals in line with the 'sabka saath, sabka vikas' motto of the Modi government is 2022, which is the 75th year of India's independence and three years after the term of the current government ends.

On the other hand, proposed raise in service tax will increase in cost to consumer and which will thereby lead the pockets to cry. An increase in service tax from 12% to 14% will make everything from haircuts and telephone bills to eating out and watching a cricket match a little bit more expensive. Therefore it seems not so much good for the middle class people, since exemption limits remain same no increase in disposable income but expenses on movies, hotels, travel, legal, banking, restaurants etc all will increase.

Is shaking pocket of common man will help to MAKE in INDIA:

It may seem towards a “Make In India” on a corporate note, which indeed it is, but it surely is a “Shaking pocket of ‘Mango people’ (Aam Aadmi)” for the common man. From the common man perspective, I stand confused between a Thumbs Up and Thumbs Down, especially with respect to the basic and day-to-day amenities.

No doubt, deductions have been given, certain rate of taxes too have gone down, many proposals favoring the SMEs, Startups, Senior Citizens, SC/STs and the under-privileged have come up. Skill development, Education, Welfare and Health sector have also been considered, but these all will impact in a long-run.

From immediate impact on his/her finance, the common man stands disturbed on his day-to-day expenditure. The common man was expecting a rise in the tax exemption limits, so it was a disappointment to see the limits remain unchanged.  Although the above changes will help an individual reduce his tax liability, but it doesn’t increase his disposable income.

Yes, it is SABKA Budget but not APNA budget for everyone:

The budget was quiet a disappointment to the common man as the Finance Minister did not increase the Income Tax slab rate. Adding to this, the service tax rate was hiked from 12.36% to 14%. Wealth tax was abolished and an additional 2% surcharge was imposed on super rich.

Overall, with most services that we shall have to undertake or products we shall have to buy, we shall have to shelve more towards tax, this stands to pro Aam Aadmi. Luxury is now luxuriously available. It now says “Think before you Spend”.

Great things indeed come in small packages. Introduction of tax-free infra bonds, no tax on initial investment, interest and maturity proceeds for Sukanya Samriddhi scheme and doubling of transport allowance will make the common man plough more money in to saving.

So over all it’s a good budget from the point of view of government. It will provide strength to government to recover its losses & fiscal deficit. Without getting suffered no one ever got a success. So these stringent amendments are necessary to recover our economy. Therefore we can say that Yes “It is SABKA Budget, but probably not APNA budget”.

Disclaimer:

The information contained in this write up is to provide a general guidance to the intended user. The information should not be used as a substitute for specific consultations. Authors recommend that professional advice is sought before taking any action on specific issues.

This Article has been shared by CA Harsha Ramnani. She can be reached at harsha.ramnani@sba-ca.com

Follow @studycafe1

Read more »

Budget 2015 - Clarification regarding increase in Service Tax Rate

Amid huge expectations and challenges facing the economy, the Hon’ble Finance Minister Shri Arun Jaitley has presented his 1st Full-year Union Budget for the year 2015-16 on 28th February, 2015.  In his Budget Speech, he has proposed to increase the effective rate of service tax from 12.36% to 14%. This proposal has created doubts in the minds of some assessee’s and professionals as well. The objective of this article is to identify various issues/queries relating to proposed rate of service tax and try to clarify the same in simple language. To begin with, I quote the relevant Clause 121 of the Budget Speech as below:-

“121. Introduction of GST is eagerly awaited by Trade and Industry. To facilitate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of service tax plus education cesses from 12.36% to a consolidated rate of 14%.”

1. Do  I  have  to  charge  new  rate  of  service  tax  from  01-03-2015 onwards like we do in case of changes in rates of central excise?

No, you don’t have to charge new rate of service tax from 01-03-2015 onwards as the new rate has not yet come into effect. Till then, the existing rate of 12% (service tax) + 2% (Education Cess on tax) + 1% (SHE Cess on tax) i.e. effective rate of 12.36% shall continue.

2.   Whether  the  new  enhanced  rate  of  service  tax  going  to  be effective from 1st  April, 2015?

No, the proposed service tax rate will not become effective from 01-04-2015. Many service providers and receivers are having the misconception that any change in rate of service tax takes effect from 1st April of the year. It shall come into effect from a date to be appointed by the Central Government, by way of notification in the Official Gazette, AFTER the enactment of the Finance Bill, 2015. The proposed amendments vide Clause 106 of the Finance Bill, 2015 is quoted as below:-

“106. In section 66B of the 1994 Act, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, for the words “twelve per cent.”, the words “fourteen per cent.” shall be substituted.”

To Download the Whole Article Click Here

This article has been shared by Manoj Agarwal. He can be reached at servicetaxexpert@yahoo.com

Follow @studycafe1

Read more »

Budget Implication on Personal Taxes

The Finance Bill, 2015 presented by the Finance Minister, Mr. Arun Jaitely on 28th February, 2015. Given the economic scenario, very few reliefs particularly for lower and middle income groups are been provided. The basic purview taken by the government behind rationalising the transformations is to bring the current taxing provisions in line with the proposed plan of Goods and Service Tax. Below are the major highlights of Finance Bill 2015:

Direct Tax:

Ø  Basic Exemption Limits for Individuals

There has been no change in personal tax rates. With a view to replace Wealth tax, an additional surcharge of 2% is proposed in case wherein income exceeds Rs. 1 Crore

Ø  Increase in the limit of deduction of Mediclaim

In view of continuous increase in medical expenditure, it is proposed to increase the limit of deduction under section 80D from Rs. 15,000 to Rs. 25,000. In case of senior citizens, the limit of deduction is proposed to be increased from Rs. 20,000 to Rs. 30,000.

As a welfare measure towards very senior citizens who are not covered under medical insurance, it is proposed to provide a deduction to the extent of any payment made on account of medical expenditure but restricted to Rs. 30,000 under section 80D.

The aggregate deduction available to any individual in respect of health insurance premium and the medical expenditure incurred would however be limited to Rs. 30,000.

Ø  Clarification on investment in Sukanya Samriddhi Account Scheme under Section 80C

In order to promoter welfare of girl Child, Sukanya Samriddhi Account Scheme was launched as eligible instrument under Section 80C. further it is clarified that the interest accruing on deposits in, and withdrawals from this account will be tax exempt.

Ø  Increase in limits of deduction under Section 80DD and 80U for disabled person

In view of the rising cost of medical care and special needs of a disabled person, it is proposed to amend section 80DD and section 80U so as to raise the limit of deduction in respect of a person with disability from Rs. 50,000 to Rs. 75,000. It is further proposed to raise the limit of deduction in respect of a person with severe disability from Rs. 1 lakh to Rs. 1.25 lakhs.

Ø  Increase in limits of deduction under Section 80CCC and 80CCD

In order to promote social security, it is proposed to raise the limit of deduction for an amount paid or deposited for a contract for any annuity plan of LIC or any other insurer for receiving pension from a fund set up under a pension scheme, under section 80CCC from Rs. 1 lakh to Rs. 1.50 lakh.

With a view to encourage people to contribute towards National Pension Scheme, it is proposed that in addition to the limit of deduction under section 80CCD(1), an additional deduction in respect of any amount paid, of upto Rs. 50,000 for contributions made by any individual assessees under the NPS.

However, the overall limit of deductions under Section 80C, 80CCD and 80CCC cannot exceed Rs. 1.50 lakhs as per existing provisions of Section 80CCE.

To Download the copy of Memorandum to Finance Bill Click Here

Follow @studycafe1

Read more »