While the DTC has been delayed, (due on-going work on the same done by the Parliamentary Standing Committee on Finance), the Budget 2012 has move a step closer to DTC by increasing the base exemption limit to Rs 2,00,000 (from the present Rs 1,80,000). Similarly the DTC rates have been proposed to be introduced for personal income tax. Thus now personal income tax slabs are proposed to be as under for general category of individual tax payers which will provide a relief of Rs 2,000 for individual tax payers:
Some numbers will help us better recognise the impact of this move.
Let's take the case of a male individual whose net taxable income is Rs 10,00,000. As per the current tax laws his income tax liability will be Rs 1,56,560 (for FY 2011-12), while in the FY 2012-13, once the new base exemption limit applies, his tax liability will work out to Rs 1,33,900, i.e. a saving of Rs 22,660.
For Senior citizens nothing has changed, the base exemption stands at Rs 2,50,000 while the qualifying age for senior citizens stands at 60 years. Also in the previous budget 2011-12 a special category called "Very Senior Citizens", age 80 and above with the base exemption limit at Rs 5,00,000 still prevails.
In addition to this, the Budget 2012 has also laid down a few sweeteners:
As far as corporate taxes are concerned the rates have been kept unchanged but the rate of withholding tax on interest payment on ECBs is proposed to be reduced to 5% from 20% for 3 years for certain sectors.
In order to moderate the outgo of profit-linked deductions a proposal to extend the levy of Minimum Alternative Tax (MAT) to all persons, other than companies, has been put forth.
We think the proposed increase in the base exemption limit, would provide some relief to a large number of individual tax payers, as it means more disposable income in the hands of consumers, which may drive the consumption story.
Vigilance on tracking unaccounted money:
| Income-tax rates in Budget 2012 | |
|---|---|
| Taxable Income | Tax Rate |
| Upto Rs 200,000 | Nil |
| Rs 200,001 to Rs 500,000 | 10% |
| Rs 500,001 to Rs 10,00,000 | 20% |
| Rs 10,00,001 & above | 30% |
Some numbers will help us better recognise the impact of this move.
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Let's take the case of a male individual whose net taxable income is Rs 10,00,000. As per the current tax laws his income tax liability will be Rs 1,56,560 (for FY 2011-12), while in the FY 2012-13, once the new base exemption limit applies, his tax liability will work out to Rs 1,33,900, i.e. a saving of Rs 22,660.
For Senior citizens nothing has changed, the base exemption stands at Rs 2,50,000 while the qualifying age for senior citizens stands at 60 years. Also in the previous budget 2011-12 a special category called "Very Senior Citizens", age 80 and above with the base exemption limit at Rs 5,00,000 still prevails.
In addition to this, the Budget 2012 has also laid down a few sweeteners:
- Deduction of upto Rs 10,000 for interest from savings bank accounts for individual tax payers
- Deduction of upto Rs 5,000 for preventive health check up
- Senior citizens not having income from business proposed to be exempted from payment of advance tax
- Reduction in Securities Transaction Tax (STT) by 20% to 0.1% on cash delivery transactions
- Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.
As far as corporate taxes are concerned the rates have been kept unchanged but the rate of withholding tax on interest payment on ECBs is proposed to be reduced to 5% from 20% for 3 years for certain sectors.
In order to moderate the outgo of profit-linked deductions a proposal to extend the levy of Minimum Alternative Tax (MAT) to all persons, other than companies, has been put forth.
We think the proposed increase in the base exemption limit, would provide some relief to a large number of individual tax payers, as it means more disposable income in the hands of consumers, which may drive the consumption story.
Vigilance on tracking unaccounted money:
- Introduction of compulsory reporting requirement in case of assets held abroad
- Allowing for reopening of assessment upto 16 years in relation to assets held abroad
- Tax collection at source on purchase in cash of bullion or jewellery in excess of Rs 2 lakh
- Tax deduction at source on transfer of immovable property (other than agricultural land) above a specified threshold
- Tax collection at source on trading in coal, lignite and iron ore increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value
- Taxation of unexplained money, credits, investments, expenditures etc. at the highest rate of 30% irrespective of the slab of income
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