Union Budget 2016 – The year of rationalization and simplification
- No change in the income-tax rate for individuals. However, the rate of surcharge for tax payers (ie, persons other than companies, firms and cooperative societies) with income over INR 1 crore has been increased to 15 percent (as against 12 percent) taking the effective rate to 35.535 percent from the existing rate of 34.608 percent.
- Tax at the rate of 10 percent on the gross amount of dividend will be payable by recipients receiving dividend in excess of INR 10 Lakhs per annum. This is in addition to the dividend declared by the Company.
- Resident tax payers whose income is less than INR 500,000 are eligible for an enhanced rebate of INR 5,000 against the earlier limit of INR 2,000.
- Interest earned on deposit certificates issued under the Gold Monetization Scheme is exempted from tax.
- Currently, employers contribution to Provident Fund is not taxable in the hands of the employee to the extent such contributions do not exceed 12 percent of salary. The Finance Bill proposes to cap this amount to INR 150,000 per annum or 12 percent of salary, whichever is lower.
- The unpleasant surprise in the Union Budget is the proposal to reduce the exemption in respect of funds withdrawn from Provident Fund to 40 percent. With the increasing opposition, one would hope that the FM would withdraw this proposal.
- For individual tax payers who do not receive House Rent Allowance from their employers, the deduction available for rent has been increased from INR 24,000 per annum to INR 60,000.
- In the case of first-home buyers, deduction for additional interest of INR 50,000 per annum for loans upto INR 35 Lakhs, where the house cost does not exceed INR 50 Lakh. Further, the period of construction or acquisition for availing higher deduction of mortgage interest INR 200,000 on housing loan has been enhanced to 5 years from 3 years.