Personal income tax slab changes recommended by the Direct Tax Committee
With the Union Budget 2020 approaching, a report has been prepared by the Central Direct Tax Committee. As per the report, changes have been suggested in the current direct tax system.
According to the committee, the current personal income tax slabs need to be overhauled. Individuals earning between Rs.2.5 lakh and Rs.10 lakh will have to pay a 10% tax. However, there will be a full rebate of up to a year for Rs.5 lakh. Individuals who are earning between Rs.10 lakh and Rs.20 lakh will have to pay a 20% tax per year. According to the recommendation, a 30% tax should be levied for individuals who earn between Rs.20 lakh and Rs.2 crore. In case you are earning more than Rs.2 crore, a 35% tax must be paid. The removal of surcharge has also been recommended by the committee. Various pros and cons of the two different models of taxation were also discussed by the committee. The report also states various benefits of the territorial system such as easier compliance, interpretation of tax treaties, residential status disputes, etc. Various limitations of the system have also been discussed in the report. An additional source rule has also been suggested by the report since the current definition of income has been deemed to accrue in the country.
23 Jan 2020
New income tax slabs suggested by IT task force
An Income Tax task force, comprising of K. Subramanian, Chief Economic Advisor, and a member of the Central Board of Direct Taxes, Akhilesh Ranjan, has tabled a report on 19 August 2019. The report suggests new income tax slabs for individuals and some changes in taxations for businesses. For individuals who earn up to Rs.10 lakh per year, the income tax has been suggested at 10%; for those with incomes between Rs.10 lakh and Rs.20 lakh per year, income tax would be 20%; for those with an income ranging from Rs.20 lakh to Rs.2 crore per year, income tax would be 30%; and for those with an income that exceeds Rs.2 crore per year, income tax would be 35%. No changes were suggested for a change in the current exemption limit of income tax. For businesses, the suggestion was to eliminate dividend distribution tax and tax the recipients instead for the dividend. It also suggested to increase the tax base by widening of the presumption taxation. It suggested foreign companies to be taxed at 25% (currently it is 40%) and if they are repatriated, a 15% branch profit tax rate. Other suggestions are removing of surcharges that range from 15% to 37%, increasing efficiency gains by restriction of deductions to individuals with regard to education and medical expenses, provident fund, charity, and housing loans, and removal of the deductions in lieu of rentals and interest on FD savings, insurance, and equity-linked savings schemes.
12 November 2019
ITR must be filed by housewives who do not make an income
Most homemakers think they do not need to file their ITR as they are not making an income. However, in certain cases, it is vital that the ITR is filed on time. There are many benefits to filing the returns as well, even if homemakers are not liable to pay tax.
Depending on the income that is generated in a year, tax returns must be paid by a homemaker or any other individual. Individuals who generate an annual income of less than Rs.2.5 lakh and are below the age of 60 years are not required to file ITR. The limits are Rs.3 lakh and Rs.5 lakh for individuals who are between the ages of 60 years and 80 years and above 80 years, respectively. However, in some cases, money is received by homemakers from different sources. Depending on the source of income, homemakers must file their ITR. In case the housewife receives money from her husband and an investment is made in her name, the amount will not be taxable. However, if any income is generated from that money, tax must be paid for those returns. Interest that is generated from fixed deposits that were gifted by parents must also be taxed. The amount of tax that must be paid will depend on the tax slab the homemaker falls under.
25 July 2019
Ways to save income tax by investing in case income is more than Rs.5 lakh
Individuals who earn a taxable income of over Rs.5 lakh can invest in particular investment schemes to avoid paying income tax. The tax exemption limit is Rs.2.5 lakh. In case an individual’s yearly salary is Rs.5 lakh, he/she can earn Rs.12,500 as a full rebate on the tax that is liable.
In case an individual earns Rs.5 lakh and above, the tax slab on the income that is made for Rs.2.5 lakh and more is applied for them. Therefore, if the taxable income of the individual is Rs.6.5 lakh, the individual will not receive a rebate and tax must be paid depending on the tax slab. However, individuals can avoid paying tax by investing in certain tax-saving instruments. However, this option is not available for all categories of income. In case individuals have availed a home loan, they can claim benefits of up to Rs.1.5 lakh on the interest that is being paid on the house loan. Further, investments can be made in schemes under Section 80C of the Income Tax Act as they offer tax benefits of up to Rs.1.5 lakh. Under Section 87A of the Income Tax Act, individuals can also claim a tax rebate of Rs.12,500. Individuals can also claim tax benefits of up to Rs.1.5 lakh for repayment of home loans and payment of their child’s tuition fees.
23 July 2019
Marginal relief that is applicable in Income Tax surcharge
Earlier, a surcharge of 15% was levied on taxpayers who made an income of more than Rs.2 crore per year. However, the surcharge has been increased to 25% for individuals who earn between Rs.2 crore and Rs.5 crore as per the Union Budget 2019. The surcharge has also been increased to 37% for individuals who earn more than Rs.5 crore in a year. Additionally, the surcharge is 10% and 15% for individuals who earn between Rs.50 lakh and Rs.1 crore and between Rs.1 crore and Rs.2 crore.
Under this category, marginal relief comes into effect. For example, in case an individual earns Rs.51 lakh in a year, he/she will have to pay a surcharge of 10%. The net tax liability that is payable comes up to Rs.13,42,500. Therefore, the surcharge that must be paid is Rs.1,34,250. However, this amount is higher than the difference between the taxable income and the tax bracket, which is Rs.51 lakh and Rs.50 lakh, respectively. The difference in the amount is adjusted in the marginal relief. Therefore, Rs.70,000 is the net income above Rs.50 lakh. Since the surcharge is Rs.70,000, the net tax payable comes up to Rs.14,69,000 which is inclusive of the 4% education and health cess (Rs.56,500). According to the Income Tax Act, 1961, marginal relief is provided to taxpayers who make a taxable income above the threshold limit where the surcharge is applicable, but the surcharge is more than the net income that is above the threshold.
19 July 2019
Understanding the income tax changes that affect the super-rich
As per the Budget 2019-2020, a proposal has been put forward by the government to increase the applicable surcharge to individuals who make a taxable income of more than Rs.2 crore. A surcharge is an additional charge that is levied on individuals who make a high income of money. However, the government did not make any changes to the current income tax structure.
The important tax changes that affect the super-rich are mentioned below:
The surcharge rates have been increased to 25% from 15% for individuals who make an income of above Rs.2 crore but below Rs.5 crore.
The surcharge has increased from 15% to 37% for individuals who earn more than Rs.5 crore.
The surcharge remains the same for individuals who make an income of less than Rs.2 crore. Individuals who earn more than Rs.50 lakh but less than Rs.1 crore, the surcharge is 10% and for individuals who earn more than Rs.1 crore but less than Rs.2 crore, the surcharge remains at 15%.
The highest tax rate for individuals who earn between Rs.2 crore and Rs.5 crore will increase to 39% from 35.88%. The tax rate has been increased to 42.74% from 35.88% for individuals who make an income of more than Rs.5 crore.
15 July 2019
Union Budget impact on NRIs
The Finance Minister of India, Nirmala Sitharaman, presented the Union Budget in the Parliament on 5 July 2019. The budget did not disappoint Non-Resident Indians (NRIs) as well as resident Indians. Emphasis was given on improving the transparency in the process of taxations as well as boosting the infrastructure investment.
Some of the highlights that will be a boost to NRIs are infrastructure development of railways and airports and emphasis in Digital Payments and Digital India. There has been an increase in the personal income tax rate due to the higher surcharge that has been levied for the very rich. Income rates go up by 39% for individuals who make an income between Rs.2 crore and Rs.5 crore and by almost 43% for individuals who make an income of more than Rs.5 crore. There has been a change in the gift tax provisions for NRIs as well. NRIs who receive any gift worth Rs.50,000 or more after 5 July 2019, will have to disclose the gift as an Indian income and pay tax depending on the tax slab they fall under. The threshold limit for Tax Deducted at Source (TDS) has also been increased from Rs.1.8 lakh to Rs.2.4 lakh on rental income. An event titled ‘Annual Global Investors Meet’ has also been proposed by the Budget. This will help in bringing an impetus on NRI investments in India.
15 July 2019
The revised income tax slabs and rates for financial year 2019-20
The interim budget for 2019 was recently announced on 1 February 2019. In this budget, a full tax rebate was announced for all the tax paying assessees who have a taxable income of up to Rs.5 lakh. This rebate will be applicable under Section 87A of the Income Tax Act. This rebate will provide tax savings of up to Rs.12,500 for all the assessees in this income bracket. Taxpayers who can save more will be able to push the rebate further and can get a full tax rebate for an income of up to Rs.6.5 lakh.
No changes have been implemented for the tax slabs, only the rebate has been introduced. Thus, there will be no effect on the tax incidence of those who have a larger income. However, individuals with an income of under Rs.10 will be able to add tuition fees and home loans to get additional benefits. The acting Finance Minister Piyush Goyal announced that income from interest for amounts up to Rs.40,000 will be exempted from tax. However, the implementation of this exemption will decided by the next government after the Lok Sabha elections. Goyal also added that the standard deduction for the salaried class will be increased from Rs.40,000 to Rs.50,000.
15 February 2019
The revised income tax slabs and rates for financial year 2019-20
The interim budget for 2019 was recently announced on 1 February 2019. In this budget, a full tax rebate was announced for all the tax paying assessees who have a taxable income of up to Rs.5 lakh. This rebate will be applicable under Section 87A of the Income Tax Act. This rebate will provide tax savings of up to Rs.12,500 for all the assessees in this income bracket. Taxpayers who can save more will be able to push the rebate further and can get a full tax rebate for an income of up to Rs.6.5 lakh.
No changes have been implemented for the tax slabs, only the rebate has been introduced. Thus, there will be no effect on the tax incidence of those who have a larger income. However, individuals with an income of under Rs.10 will be able to add tuition fees and home loans to get additional benefits. The acting Finance Minister Piyush Goyal announced that income from interest for amounts up to Rs.40,000 will be exempted from tax. However, the implementation of this exemption will decided by the next government after the Lok Sabha elections. Goyal also added that the standard deduction for the salaried class will be increased from Rs.40,000 to Rs.50,000.
15 February 2019
Tamil Nadu government all praise for GST, calls it transparent and self-policing tax regime
A minister recently praised the Goods and Services Tax (GST) in a Tamil Nadu government assembly. The minister described the newly implemented tax system as a “transparent and self-policing tax regime”. Commercial Taxes Minister KC Veeramani recalled the year-old rollout of the new central tax regime which subsumed many other taxes and said that GST was a “landmark in the field of indirect tax reforms.”
The Goods and Services Tax (GST) was introduced with the view of subsuming the different central and state taxes which created a cascading effect of tax. It prevented the cascading effect and paved way for a common national market, Veeramani added. The main objective of GST was to make the Indian products competitive in domestic and international markets and provide the necessary momentum to the growth of the economy. He further said that the abolishment of check-posts has allowed the hassle-free movement of goods across the nation. Veeramani also said that the Commercial Taxes department collected revenues worth Rs.73,148.28 crore in the financial year 2017-18. This collection also includes the GST compensation and IGST settlement advance. He concluded that the revenue collection had seen a growth of 10.51% in spite of the uncertainties in the country in terms of the economy.
4 July 2018
What is standard deduction?
Standard deduction is basically a benefit that some income tax payers receive, irrespective of the investments made or the expenses they have incurred. In order to claim standard deduction, the assessee need not submit any proof or document.
Based on Section 16 of the Income Tax Act 1961, a pensioner or salaried individual can claim standard deduction up to Rs.40,000. Standard deduction is available from the financial year 2018-19, and will be applicable from the assessment year 2019-2020.
19 June 2018
