blog

Benefits for tax payers
a) For salaried class the standard deduction has moved up by Rs.25000. Entities and business units can reduce their expenses to earn the income and for salaried class, this is the only exemption with all tax saving options taken out in the new tax regime. A welcoming news.

b) Tax slabs are lowered. Max. benefit of Rs.17,500 in taxes due to this revision. This will benefit all income tax payers.

c) Exemption on Capital Gains from tax has moved up from Rs.1 lacs to Rs.1.25 lacs. A small console to the harsh change in CG tax %.

d) On Corporate tax, foreign companies having operations in India stands to gain with the reduction in % from 40 to 35.

e) CD rate changes helps reduce gold, mobile and solar businesses, reduce price of certain drugs and enhances competitiveness of marine exports.

f) Angel tax is abolished. A welcome amendment for startup’s to do business without the hassles of taxation issues around fair value computation.
g) Family pensioner’s taxable pension limits move up from Rs.15 K a month to Rs.25 K. A welcome amendment to retired citizens of India, who are in general expected to fend themselves the rest of their life.

Unfavourable amendments in Budget

a) Indexation benefits on long term assets are quietly taken away. Indexation helps adjust for inflation and thereby reduce the reduce the taxable portion of capital gains which will no longer be available. The impact will be very severe on land deals. But it was later clarified by FM that the indexation up to 2001 is grandfathered. Still a big tax incidence for sellers.

b) Capital gains tax – Short term tax rates are increased from 15% to 20% and LTCG tax are up from 10% to 12.5%. This will substantially increase the tax burden on all MF disposal for capital gains and those who trade in stock exchange. Drop in index today was due to this change.

c) Share buy back by companies instead of dividend used to help SHs lower tax incidence. Now this is made at par with dividend taxability.