The Budget and your taxes

February 29, 2016 . Bhavana Acharya

The Budget, apart from tinkering with taxation rules on retirement products, has not made any changes to tax slabs or rates. But for some individuals, there are small changes that can make quite the difference to the total tax outgo.

First, the bad news. The super rich have plenty to gripe over in this Budget. For those whose income is above Rs 1 crore, the 12 per cent surcharge they used to pay has now been hiked to 15 per cent. This apart there have been cesses or duties levied on certain luxury products, which will send their bills higher. The rich, therefore, will suffer quite an impact.

Traders also have something to moan about. Securities transaction tax on sale of options where the option is not exercised will move up to 0.05 per cent of the option premium, from the 0.017 per cent it had been until now. This rule will take effect from 1st June, 2016.

But here’s the good news! This involves only smaller tax payers, though. Existing provisions allowed rebate of the entire tax paid or Rs 2,000, whichever was lower, for individuals whose income was under Rs 5 lakh. This rebate amount has been hiked now to Rs 5,000.

Of homes and rents
First-time home buyers will now be able to claim an additional Rs 50,000 on their home loans. Section 24 of the Income Tax Act already allows Rs 2 lakh in interest payments on self-occupied properties. The extra deduction will carry through as long as the loan repayment continues. There are a few caveats here though. One, the loan amount should not exceed Rs 35 lakh. Two, the property value should also not be more than Rs 50 lakh.

Three, the loan has to be sanctioned between April 1, 2016 and March 31, 2017. Of course, this may be extended beyond if the scheme proves successful in furthering the Government’s aim of housing for all. Incentives provided to developers of affordable homes combined with the extra deduction for home buyers can, in fact, deliver some boost to this goal.

Section 24 also has a clause amended. For loans taken to construct or acquire house property, the construction had to be completed within three years from the end of the financial year in which the money was borrowed to claim the deduction of Rs 2 lakh. This period has now been extended to five years given that property construction often drags on due to delays.

Those who are paying rent don’t need to feel left out, though. Individuals who do not receive house rent allowances from their employers but who pay rent are currently allowed a deduction under Section 80GG. The rent paid in excess of 10 per cent of their total income is allowed as a deduction, subject to a ceiling of 25 per cent or Rs 24,000 a year, whichever is less. This has now been increased to Rs 60,000 a year. In simple terms, from a maximum of Rs 24,000 a year, you will now be able to claim Rs 60,000 as your rent deduction even if you do not receive house rent allowance.

All these provisions come into effect from the assessment year 2017-18.

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