(Chaitali Bhatawdekar is senior tax professional at EY India)
Finance Minister Arun Jaitley's Union Budget 2015-16 has set out the tone for a long term growth strategy, consistent with the ambition of Prime Minister Narendra Modi. While the tax savings in this Budget for the salaried -class did not meet the sky rocketing expectations, the policy initiatives reinforced the emphasis on long term growth. The efforts in it are clearly towards aligning laws and administration to put India at par with developed countries, and hence ' Aam aadmi' will have to resist the desire to gain immediate benefits in anticipation of a better and secure future. However, the success of the proposals will be decided based on how the Modi government delivers in the years to come.
Measures to curb black money
A comprehensive new law on black money will be enacted to specifically deal with black money stashed away abroad. Concealment of income or assets and evasion of tax in relation to foreign assets will be a non-compoundable offense, punishable with penalty of 300 per cent and rigorous imprisonment up to ten years with no recourse to settlement commission. Rigorous imprisonment of up to seven years for non-filing of return or filing of return with inadequate disclosure of foreign assets is a welcome move for bringing black money back to India.
Wealth tax abolished
Wealth tax has been abolished to minimise the administrative burden on taxpayers as well as tax department. Surcharge rate for the super-rich individuals has been hiked by 2 per cent with the objective of taxing high net worth individuals. Slab rates of tax have been left unaffected. Kudos to Finance Minister Arun Jaitley for getting rid of administrative hassles and simplifying tax laws.
Building a strong social security framework
As a step towards creating a strong social security structure, pre-mature withdrawals from the recognised provident fund will be discouraged from now onwards (before completion of 5 years of completed service) by introducing a 10 per cent tax thereon. A threshold of Rs 30,000 has been prescribed on the withdrawal amount to safeguard people below basic exemption limit, while 30 per cent tax rate has been prescribed for non-furnishing of PAN to the provident fund authorities.
Reintroduction of infrastructure bonds
Infrastructure is high on the government's agenda and the sector was given allocations in the Budget. In a move to boost the sector, infrastructure bonds in roadways, railways and irrigation projects will be re-introduced.
Encouraging the girl child
Under the 'Sukanya Samriddhi' scheme, introduced by the government last year, amounts invested in the name of a girl child under this scheme is eligible for deduction under section 80C and interest on this account will also be exempted from tax.
Boost to medical insurance
In order to encourage individuals to take medical cover and keeping in mind the increasing medical costs, the deduction limits under section 80D for medical insurance premium has been hiked from Rs 15,000 to Rs 25,000. Further, in cases when premium is being paid for senior citizens, the limit has been increased from Rs 20,000 to Rs 30,000. An additional deduction of up to Rs 30,000 will be now available in respect of medical expenses incurred for very senior citizens (above 80 years of age) not covered under a medical policy.
Benefits for the differently-abled
Currently tax laws provide benefits to individuals who are differently-abled or those who support a differently-abled family member or dependent. Howver in this Budget the Finance Minister has increased the deductions allowed by Rs 25,000 for all scenarios.
Deduction in respect of medical treatment
The tax laws provide deduction for expenditure incurred in respect of self or dependents, for treatment of chronic and protracted diseases. In order to avail this deduction, the tax-payer is required to obtain a certificate from a specialist working in a government hospital. The requirement in this regard has now been relaxed and a prescription from a specialist doctor would suffice. Further, a higher limit of Rs 80,000 has been introduced for very senior citizens.
Limits for annuity plan and new pension scheme increased
With an objective of making India a pensioned society, the deduction available in the respect of contribution to LIC annuity schemes has been increased from Rs 100,000 to Rs 150,000. To promote the National Pension Scheme, a cap of Rs 100,000 on the benefit available in respect of contribution to this scheme has been removed and thus the benefit now will be 10 per cent of salary/gross total income (capped at overall Rs 150,000). For contribution above that, an additional deduction of Rs 50,000 has been proposed.
Increase in exemption with respect to transport allowance
A relief has been provided to the salaried class by doubling the exemption on transport allowance to Rs 19,200 per year.
TDS compliance
To streamline the tax deduction process, the employer will now collect relevant proofs at the time of tax deduction in respect of exemption for rent paid, house-property loss, etc.
Social security
The employees will now have an option to contribute to either Provident Fund or New Pension Scheme. For employees earning less than Rs 15,000 per month, contribution to be PF would be optional but its mandatory for the employer to contribute.
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