Some important income tax-related announcements in Finance Minister Arun Jaitley's third Budget did not get a lot of attention amid the debate about his proposal to tax Employee Provident Fund (EPF) withdrawals.
Here are five income tax proposals that you may have missed in Budget 2016:
1. Penalties in case of under-reporting of income will be charged at 50 per cent of the tax payable. For misreporting of facts, penalties will be 200 per cent. Currently, penalties are at the discretion of income-tax officers and can range between 100 per cent and 300 per cent for concealment or misreporting of income.
2. As per the Budget proposal, long-term capital gains (holding for more than 3 years) on gold bonds issued by the Reserve Bank will be exempt from tax. Long-term gains are calculated after adjusting for inflation. Gold bonds are denominated in gold units, provide a fixed rate of return of 2.75 per cent and are linked to the price of gold. Gold bonds have tenure of 8 years and a person can redeem them after 5 years at prevailing gold price at that time.
3. Interest earned on gold monetisation scheme and long-term capital gains will be tax-exempt. Under the gold monetisation scheme, customers can deposit their gold and earn interest on it. The principal on maturity and interest will be linked to the prevailing price of gold at that time.
4. In case of employee provident fund withdrawal, tax deducted at source (TDS) will be charged if the amount of withdrawal before five years is more than Rs 50,000. Earlier, TDS at the rate of 10 per cent was charged if the amount of withdrawal was more than Rs 30,000.
5. Mutual fund investors will not have to pay capital gains tax on the merger of different plans (retail, institutional, super institutional) of a mutual fund scheme. Capital market regulator Sebi had in 2012 directed mutual funds to discontinue different plans of a mutual fund scheme, and to move to one plan and one scheme structure, to reduce the number of schemes. But at the time of such merger, investors had to pay capital gains tax, depending on their tenure of investment. Last year, the government had removed capital gains tax on the merger of two mutual fund schemes.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
