Personal Income Tax
Personal income tax slabs:
- No changes in Income tax rates or tax slabs:
- Upto Rs. 2 lakh (Tax: 0%).
- Rs. 2+ to Rs. 5 lakh (Tax: 10.3% minus Rs. 2000).
- Rs. 5+ lakh to Rs. 10 lakh (Tax: 20.6%).
- Rs. 10+ lakh to Rs. 1 crore (Tax: 30.9%).
- Rs. 1+ crore (Tax: 33.99%).
- Tax credit of upto Rs. 2000 for those earning between 2+ to Rs. 5 lakh.
- Senior Citizens:
- Exemption limit for senior citizens (60+ years): 2.5 lakhs.
- Exemption limit for very senior citizens (above 80 years): 5 lakhs.
- People with annual taxable income exceeding Rs. 1 crore: 10% surcharge applicable to entire taxable income and not just the portion over Rs. 1 crore.
- Donations to 'National Children's Fund' allowed 100% tax deduction now.
How are consumers impacted:
- Mobile phones above Rs. 2000 expensive: Phones of say Rs. 20,000 will become costlier by about Rs. 900.
- TV Set-top box: One costing around Rs. 4000 will now cost about Rs. 4200.
- Eating out:
- Dining at airconditioned restaurants costlier by about Rs. 37 for every Rs. 1000 spent.
- Effective 01-Apr-2013, Service tax of 3.71% for airconditioned restaurants not having licence to serve liquor.
- Real Estate/Home Loan:
- For first home loan upto Rs. 25 lakhs for property upto Rs. 40 lakhs, deduction increased from 1.5 to 2.5 lakhs.
- Effective 01-Mar-2013, service tax for under-construction residential units of Rs. 1 crore or above (except residential units with a carpet area up to 2,000 square feet) increased from 3.09% to 3.71%.
- A Rs. 1 crore flat will now be costlier by Rs. 62,000 and Rs. 2 crore flat by about Rs. 1.24 lakhs.
- From June 2013, seller needs to deduct 1% TDS (Tax Deduction at Source) on any property sale of over Rs. 50 lakh (other than agricultural land).
- Cars, Bikes and Parking:
- SUVs: expensive by about Rs. 15,000 to 90,000 depending upon model.
- Imported Cars: Customs duty on imported cars exceeding $40,000 hiked from 75% to 100%.
- Imported Bikes: Customs duty on imported bikes over 800cc up from 60% to 75%.
- Vehicle parking costlier due to imposition of 12.36% service tax. Example: Existing parking of Rs. 40 will be atleast Rs. 45 now.
- Gold Customs Duty: Duty free gold import allowance for Indian passengers transferring residence up from Rs. 10,000 to Rs. 50,000 for men and from Rs. 20,000 to Rs. 1 lakh for women.
- STT (Security Transaction Tax) for equity futures reduced from 0.017% to 0.01%. STT of 0.1% levied on purchaser of equity-linked mutual funds abolished.
- CTT (Commodity Transaction Tax) of 0.01% levied on sellers of non-farm commodity futures like gold/silver.
- Even though DDT increased from 5% to 10% but dividends continue to be tax free in the hands of shareholders.
- Banking: India's 1st women's PSU bank to be set up- provide services exclusively to women.
- Cigarettes: A pack of say Rs. 120 will be costlier by about Rs. 10.
- Hand-made carpets: A carpet of say Rs. 20,000 to be cheaper by about Rs. 1000.
- More scholarships for SC/ST students and minority students.
- Vocational courses from approved institutions of say Rs. 50,000 to be cheaper by about Rs. 5000.
Corporate and Excise Tax
Corporate and Excise tax changes:
- Changes in Corporate tax rates: None. 10% surcharge on firms making Rs. 10 crore.
- Excise duty: No change in key rates. Sector/Product specific changes are as follows:
- On mobiles costing over Rs. 2000, increased from about 1% to 6%.
- On cigarettes, excise duty increased by 18%.
- On marble blocks, increased from Rs. 30 sq metre to Rs. 60 square metre.
- On domestic SUVs, increased from 27% to 30%.
- On set-top box, increased from 5% to 10%.
- On hand-made carpets, excise duty reduced to 0%.
- Domestic companies:
- Effective corporate tax rate increased from 32.45% to 33.99%.
- Increase in surcharge from 5% to 10% where total income exceeds Rs. 10 crore.
- Effective MAT(Minimum Alternate Tax) increased from 20% to 20.96%.
- Dividend Distribution Tax (DDT) surcharge increased from 5% to 10%.
- Foreign companies:
- Effective rate increased from 42.02% to 43.26%.
- Increase in surcharge from 2% to 5% where total income exceeds Rs. 10 crore.
What are the short term and long term capital gains tax rates?
- Short term capital gains tax rate on sale of equity or equity linked mutual fund: 15%. (No change).
- Long term capital gains tax rate on sale of equity or equity linked mutual fund: Nil. (No change).
- For equity, any gain arising after holding the shares for at least 1 year is considered long term capital gain.
GST and DTC
Brief explanation of GST and DTC:
- GST (Goods and Services Tax): Major tax reform.
- GST is a much simplified, national level tax shared between Centre and the States.
- GST will lead to abolition of central/state level sales tax, octroi & other taxes.
- GST is expected to raise revenues substantially and make tax system more efficient.
- For more details: Click here
- Highlights of Direct Tax Code (DTC) bill:
- DTC bill seeks to simplify tax structure, remove most tax exemptions and replace the existing IT Act, 1961.
- Proposes to abolish surcharge, education cess, LTA.
Fiscal and revenue deficit, Capital expenditure, Excise duty, MAT:
- Fiscal Deficit:
- The difference between all expenditure and receipts (including non-tax ones likes disinvestment). The deficit is bridged by market borrowings usually leading to high interest rates.
- Amount of money government needs to borrow from the market to meet its expenditure when its revenue (tax, recoveries and interest earned on loans given to state governments) is not adequate.
- Revenue Deficit:
- It is the government's 'current expenditure' not covered by its 'tax collections'. Current expenditure does not include interest payments on debt and capital spending.
- This number should ideally be zero as a revenue deficit means borrowing to meet today's needs.
- Capital Expenditure: The government spending that goes into creation of assets like schools, hospitals that will yield benefit for many years.
- Excise Duty: Tax charged on goods produced within the country (as opposed to customs duty that is charged on goods from outside the country).
- MAT (Minimum Alternative Tax):
- Indian Income Tax Act contains large number of exemptions and deductions from total income.
- This results in the emergence of Zero tax companies which inspite of having high book profit are able to reduce their taxable income to nil.
- Hence, a company is required to pay a minimum tax of book profit. As of 2013, MAT levied rate is 18.5%.
- Infrastructure Bonds: Saving instruments offered by government with a fixed interest rate. Money is locked for a period of 5 to 10 years. For tax saving investment options: Click here
What is the frequency of budget presentation?
- Frequency: Presented once every year on last working day of February by Indian Finance Minister in Parliament.
- In 2013, budget was presented by P. Chidambaram on 28th February, 2013.
- In 2012, budget was presented on March 16th (Friday). Delayed because assembly elections were held for 5 states in February.
Stock Market (Sensex/Nifty) closing on budget day:
- In 2013, Sensex down by 290 points to 18861. Nifty down by 103 points to 5693 level.
- In 2012, Sensex down by 209 points to 17466. Nifty down by 62 points to 5317 level.
- In 2011, Sensex up by 122 points to 17823. Nifty up by 29 points to 5333 level.
- In 2010, Sensex up by 175 points at 16429. Nifty up by 62 points to 4922 level.
Which finance minister presented full budget maximum number of times?
- Morarji Desai: Presented budget 10 times. Maximum by any minister in India.
- P. Chidambaram: Presented full budget 8 times.
- Pranab Mukherjee: presented the budget 7 times.
Interesting budget statistics and changes over years:
- Peak Customs Duty: In 1991, was 300%. In 2011, came down to just 10%.
- Income Tax Rate: Since 1991, peak income tax rate is down by about 50%.
- Inflation: It was 13+ % in 1991 compared to around 8% in 2011.
- Foreign Direct Investments (FDI): In 1991, was $130 million and in 2010, $35+ billion.
- Majority Tax Collection: In 2011-12...
- 63% of total income tax came from just 1.3% taxpayers earning above Rs. 20 lakhs.
- 56% of total corporate tax came from top 250 odd companies.
- Super Rich in India: In 2012, only 42,800 people declared their annual taxable income to be over 1+ crore.
- Forex Reserves: Excellent Growth in Foreign Exchange Reserves
- In 1991: Forex reserves were $1.2 billion (enough for just 3 weeks of essential imports).
- In 2011: Reserves grew to $300+ billion.