The new Indian government ready to present its maiden budget in
July 2014, there are a lot of articles in the press. A word cloud may
hover around that may include words like tax slabs, income tax rates,
wealth tax, fiscal deficit and so on. The noise will only rise as we
head closer to the day. Here are 5 things you need to note as a taxpayer:
- Income tax: Income tax is paid on the taxable income that is earned by an individual
during a financial year. People with annual income up to Rs 2,00,000
pay no tax. Those earning between Rs 2 to 5 lakh pay 10% while those earning between
Rs 5 lakh to Rs 10 lakh annually pay 20%. The tax rate is 30% on people
earning more than Rs 10,00,000 per annum. There is a demand to provide
relief to the salaried middle-class by increasing the basic tax
exemption limit to Rs 3,00,000 from the current Rs 2,00,000 per annum.
This means income up to Rs 3,00,000 would be exempted from income tax.
- Expensive or cheap: A lot of goods and services get expensive or cheap after the budget. An all-round cut in taxes that makes your cars or refrigerators cheap is unlikely.Finance minister Arun Jaitley will try to cut expenditure and enhance revenue through taxation. Hence, there is very little possibility that things would get cheaper after the budget.
- Tax returns: The budget could simplify the process of filing of returns further. A couple of years ago, the government gave a relief to salary earners up to Rs 5,00,000 per annum from filing of tax returns. The new government intends to simplify processes for ordinary people.
- Tax rebates and benefits: The government needs to encourage savings for retail investors to finance future growth. Currently, under section 80C, if you invest Rs 1,00,000 in public saving schemes, or equity-linked mutual funds or other designated investment schemes, you can claim deduction and save up to Rs 30,000 or 30% tax. In addition to this, you can claim deduction on your home loan interest rate of up to Rs 1,50,000 and save another Rs 45,000 in tax.
- Indirect tax: While income tax you pay directly, there are a host of indirect taxes you pay for goods and services that you buy. So when the budget announces a change in the excise duty for cars, price of cars applicable to you changes. This is because car makers pass on the increase or decrease in taxes to you. The same thing applies to electronic goods that you buy or import.
