Budget 2016 at a glance

MikeRX · 29th February 2016, 13:36

Note: Indian cars & the budget can be discussed at this link!

1. Current Account Deficit has declined to $14.4 bn dollars, projected to be 1.4% of GDP

2. GDP growth accelerated to 7.4%
With the revision in how GDP is calculated, most economists are not convinced about the GDP reported by the Government. This has not been helped by the fact that the ground situation does not indicate that the economy is growing at a robust rate of above 7%.

3. Jaitley proposes listing of PSU general insurance companies
Government looking at divesting stakes in the Public insurance companies by taking the first step of listing them on the market.

4. Long Term Capital Gain period for unlisted firms reduced to 2 years from the previous limit of 3 years.

5. Relief to those in rented houses: deduction raised from Rs 24,000 to Rs 60,000 under Section 88G.
This is for those living in a rented house but are not eligible for HRA deductions.

6. Lower Corporate IT rate for FY17 of relatively small enterprises, with turnover of less than Rs 5 crore limited to 29% plus cess
Not a substantial decrease from the 30% that normal firms pay as tax.

7. Tax holiday for start-ups for 3-5 years from year of setting up.
With not defining what a startup is, only adds to the ambiguity.

8. If income is below Rs 5 lakh, 87A deducation increased from Rs. 2000 to Rs. 5,000
If your taxable income, after various deductions, is below 5 lakh then you are eligible for a flat deduction of Rs. 5,000 or the tax amount whichever is lesser.

9. For first homebuyers, addl Rs 50,000 tax exemption for houses under Rs 50 lakh
Provided the loan amount does not exceed Rs. 35lacs, the value of the house is under Rs. 50 lacs and you are a first time buyer of house.

10. 1% tax on luxury goods and cars; Infra cess of 1% on small cars & 2.5% on diesel cars, 4% high capacity tax on SUVs.
Cars to get expensive. 2.5% on diesel cars might be due to the ill-guided notion that diesel cars pollute more than petrol ones or to bring in more revenue for the Government as diesel cars seem to outsell petrol ones.

11. 10% extra DDT on dividend recipients earning above Rs 10 lakh per annum
Dividend is distribution of profits. Profits are already taxed and paid by the company, when distributed as dividend makes it taxing twice, and this additional 10%, when income is above Rs. 10lakhs, makes it being taxed thrice!

12. Propose to provide that on furnishing non-PAN alternative, higher rate of taxation won't apply for TDS.
TDS deducted at flat 20% for non-furnishing of PAN will not be applicable if a PAN-alternative, as specified by the Government, is produced at the time of payment.

13. Penalty to be 50% of tax in income under-reporting cases, 200% in misreporting of facts.
With all banks accounts, land/vehicle/jewellery transactions tied together through PAN/other ID cards, it should be interesting to see what is considered as under-reporting.

14. Most importantly, the tax slabs remain unchanged.
Income above Rs. 250,000 till Rs. 500,000 at 10% (for senior citizens its Rs. 300,000 and Super seniors at Rs. 500,000), between Rs. 500,000 and Rs. 10lacs at 20% and 30% thereafter.

With the upcoming elections in various states, the Budget has, in my view, has turned out to be populist rather than bold and reformist.

manowar · 29th February 2016, 17:59

Quote:

Originally Posted by MikeRX

3. Jaitley proposes listing of PSU general insurance companies
Government looking at divesting stakes in the Public insurance companies by taking the first step of listing them on the market.

Which of the 4 PSU insurers appears to be most attractive from a long term investment point of view?

shivasuma · 29th February 2016, 18:29

I am very disappointed with this budget. One, the cars are being taxed. Ok that's fine. But the one that most affects the working class is that the EPF will be taxed partially. 60% of the EPF will be taxed. That's a killer (atleast for me). Contributions post April 1st 2016 will be taxed. And as sdp1975 mentioned below, it could be taxed at the full amount.

sdp1975 · 29th February 2016, 18:37

Quote:

Originally Posted by shivasuma

I am very disappointed with this budget. One, the cars are being taxed. Ok that's fine. But the one that most affects the working class is that the EPF will be taxed partially. 60% of the EPF will be taxed. That's a killer (atleast for me). I just lost a whole lot of money. If I had know I would have withdrawn that amount since I am in the midst of changing the job. I know its illegal but I would not want to lose part of my PF (which is one of my savings).

*Upto* 40% of PF withdrawals will be tax exempt if invested in an annuity product, so the tax can go upto 100% if one chooses not to invest in an annuity product. Returns from annuity products are rubbish - they assume that you'll live till 150 years or so.

Absolutely terrible decision for salaried folks. Here's the fine print http://indiabudget.nic.in/ub2016-17/memo/mem1.pdf . I'd rather have preferred an increase in tax slabs. Hoping for some sense to prevail, and that this provision won't make it to the eventual Finance act.

mohammedismail · 29th February 2016, 19:33

I did not see any update on the Medical bit ? Is it going to remain 15K itself ?

Zappo · 29th February 2016, 20:15

This one decision on EPF alone will potentially kill it for the government. There are some holy cows which are better left untouched. EPF was one such for the old folks as this country has no other social security system as such. Government ended up today creating a huge crater in that sole source of dependence for retirees who do not have a pension or any other sources of income.

By the way, what happens to the PPF?

nowwhat? · 29th February 2016, 20:19

Quote:

Originally Posted by shivasuma

I am very disappointed with this budget. One, the cars are being taxed. Ok that's fine. But the one that most affects the working class is that the EPF will be taxed partially. 60% of the EPF will be taxed. That's a killer (atleast for me). Contributions post April 1st 2016 will be taxed. And as sdp1975 mentioned below, it could be taxed at the full amount.

Quote:

Originally Posted by sdp1975

*Upto* 40% of PF withdrawals will be tax exempt if invested in an annuity product, so the tax can go upto 100% if one chooses not to invest in an annuity product. Returns from annuity products are rubbish - they assume that you'll live till 150 years or so.

Read the fine print. A terrible budget for salaried folks and especially for those who put all their savings only in EPF. It seems the government wants to coerce people into buying annuities for their pension. What are these annuities? How do they work? A few articles I have read seem to suggest they are not at all practical.

By the way, it appears that employer contribution towards EPF has now been limited to Rs. 1.5 lakhs unlike 12% of basic pay earlier.

I wonder how the new budget affects EPF partial withdrawal for buying/construction of house, medical treatment, etc.

I am waiting for articles from financial analysts to come out in the next few days before deciding to limit EPF contribution from 1st April 2016 and invest in ELSS instead.

Both in the case of the changed EPF and NPS, it seems the only ones who will get the benefit are the heirs when a person dies. In that case they get the full amount left in the annuity without any tax liabilities.

shivasuma · 29th February 2016, 20:20

Quote:

Originally Posted by Zappo

This one decision on EPF alone will potentially kill it for the government. There are some holy cows which are better left untouched. EPF was one such for the old folks as this country has no other social security system as such. Government ended up today creating a huge crater in that sole source of dependence for retirees who do not have a pension or any other sources of income.

By the way, what happens to the PPF?

I believe its taxed the same as EPF.

Chetan_Rao · 29th February 2016, 20:44

The salaried employee is the softest target, so no surprises there. At a time where the only real long-term solution is to somehow increase tax contributor participation, the govt. is taking short-term measures to shore up revenue while pushing more and more of the salaried class away. I won't be surprised if this actually backfires badly over the longer term.

I'll wait for further clarity on this and though I can't do anything about EPF contributions as long as I remain salaried, the govt. ain't getting any more of my voluntary PF and PPF money if I stand to lose ultimately. I'd put it where it does well for me, not for a govt. who isn't doing anything for me anyway.

poloman · 29th February 2016, 21:14

Quote:

Originally Posted by Chetan_Rao

I'll wait for further clarity on this and though I can't do anything about EPF contributions as long as I remain salaried, the govt. ain't getting any more of my voluntary PF and PPF money if I stand to lose ultimately. I'd put it where it does well for me, not for a govt. who isn't doing anything for me anyway.

This move has taken away the entire sheen of an otherwise OK budget. If your PF contribution is above 1.5L, it is going to end up being double taxed which is hard to believe. I still feel some relief or clarification is due on this. If this is implemented, VPF and PPF will be dead.

Altocumulus · 29th February 2016, 21:59

So if I am on my notice period, in all probablities on a sabatical and will be withdrawing my PF, is this applicable for contributions after April 1 if passed ? Does that mean I won't be taxed on contributions till March 31 ?

garry.brant · 29th February 2016, 22:12

Quote:

Originally Posted by Altocumulus

So if I am on my notice period, in all probablities on a sabatical and will be withdrawing my PF, is this applicable for contributions after April 1 if passed ? Does that mean I won't be taxed on contributions till March 31 ?

That is correct sir, only the new contributions after march 31 will be taxed when you withdraw.

chakri400 · 29th February 2016, 22:16

Quote:

Originally Posted by garry.brant

That is correct sir, only the new contributions after march 31 will be taxed when you withdraw.

Is it only the new contributions? What about the interest on the PF amount until March 31st'16 that one accrues until withdrawal? That would be taxed too, correct?

saket77 · 29th February 2016, 22:35

In order to push NPS as a product, I see the Govt. has cut the advantage of EPF which was giving a tough competition to NPS. Now since 40% of NPS withdrawal is now tax free, the Govt has brought it at par with EPF by taxing 60% EPF withdrawals. Not arguing over the style of investment in both.

Slightly disappointing budget for middle class in my opinion on most fronts; yes, rent and 87a are there but I would have preferred an increase in slabs over them as that would have benefitted all rather than a group of selected.

Regards
Saket.

garry.brant · 29th February 2016, 22:47

Quote:

Originally Posted by chakri400

Is it only the new contributions? What about the interest on the PF amount until March 31st'16 that one accrues until withdrawal? That would be taxed too, correct?

To make it simple, any money going into the PF account after March 31 2016 will be taxed. Be it your contribution or someone else or the interest accrued after march 31.
The interest is only applicable to 60% of the amount you withdraw.
For example: you currently have 50K in PF account and you deposit 50K more after march 31st in your PF account and withdraw your PF in Dec 2016.
you will pay tax on 30K only.
Hope this clarifies.

29th February 2016, 13:36	#1
MikeRX Newbie Join Date: May 2013 Location: Chennai Posts: 21 Thanked: 53 Times	Budget 2016 at a glance Note: Indian cars & the budget can be discussed at this link! 1. Current Account Deficit has declined to $14.4 bn dollars, projected to be 1.4% of GDP 2. GDP growth accelerated to 7.4% With the revision in how GDP is calculated, most economists are not convinced about the GDP reported by the Government. This has not been helped by the fact that the ground situation does not indicate that the economy is growing at a robust rate of above 7%. 3. Jaitley proposes listing of PSU general insurance companies Government looking at divesting stakes in the Public insurance companies by taking the first step of listing them on the market. 4. Long Term Capital Gain period for unlisted firms reduced to 2 years from the previous limit of 3 years. 5. Relief to those in rented houses: deduction raised from Rs 24,000 to Rs 60,000 under Section 88G. This is for those living in a rented house but are not eligible for HRA deductions. 6. Lower Corporate IT rate for FY17 of relatively small enterprises, with turnover of less than Rs 5 crore limited to 29% plus cess Not a substantial decrease from the 30% that normal firms pay as tax. 7. Tax holiday for start-ups for 3-5 years from year of setting up. With not defining what a startup is, only adds to the ambiguity. 8. If income is below Rs 5 lakh, 87A deducation increased from Rs. 2000 to Rs. 5,000 If your taxable income, after various deductions, is below 5 lakh then you are eligible for a flat deduction of Rs. 5,000 or the tax amount whichever is lesser. 9. For first homebuyers, addl Rs 50,000 tax exemption for houses under Rs 50 lakh Provided the loan amount does not exceed Rs. 35lacs, the value of the house is under Rs. 50 lacs and you are a first time buyer of house. 10. 1% tax on luxury goods and cars; Infra cess of 1% on small cars & 2.5% on diesel cars, 4% high capacity tax on SUVs. Cars to get expensive. 2.5% on diesel cars might be due to the ill-guided notion that diesel cars pollute more than petrol ones or to bring in more revenue for the Government as diesel cars seem to outsell petrol ones. 11. 10% extra DDT on dividend recipients earning above Rs 10 lakh per annum Dividend is distribution of profits. Profits are already taxed and paid by the company, when distributed as dividend makes it taxing twice, and this additional 10%, when income is above Rs. 10lakhs, makes it being taxed thrice! 12. Propose to provide that on furnishing non-PAN alternative, higher rate of taxation won't apply for TDS. TDS deducted at flat 20% for non-furnishing of PAN will not be applicable if a PAN-alternative, as specified by the Government, is produced at the time of payment. 13. Penalty to be 50% of tax in income under-reporting cases, 200% in misreporting of facts. With all banks accounts, land/vehicle/jewellery transactions tied together through PAN/other ID cards, it should be interesting to see what is considered as under-reporting. 14. Most importantly, the tax slabs remain unchanged. Income above Rs. 250,000 till Rs. 500,000 at 10% (for senior citizens its Rs. 300,000 and Super seniors at Rs. 500,000), between Rs. 500,000 and Rs. 10lacs at 20% and 30% thereafter. With the upcoming elections in various states, the Budget has, in my view, has turned out to be populist rather than bold and reformist. Last edited by GTO : 1st March 2016 at 12:11. Reason: Adding link to the automotive budget thread :)
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29th February 2016, 18:29	#3
shivasuma BHPian Join Date: Jul 2006 Location: Bangalore Posts: 872 Thanked: 468 Times	re: Budget 2016 at a glance I am very disappointed with this budget. One, the cars are being taxed. Ok that's fine. But the one that most affects the working class is that the EPF will be taxed partially. 60% of the EPF will be taxed. That's a killer (atleast for me). Contributions post April 1st 2016 will be taxed. And as sdp1975 mentioned below, it could be taxed at the full amount. Last edited by shivasuma : 29th February 2016 at 18:53.
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29th February 2016, 19:33	#5
mohammedismail BANNED Join Date: May 2012 Location: https://t.me/pu Posts: 467 Thanked: 1,273 Times	re: Budget 2016 at a glance I did not see any update on the Medical bit ? Is it going to remain 15K itself ?
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29th February 2016, 20:15	#6
Zappo Team-BHP Support Join Date: Oct 2005 Location: Hyderabad Posts: 5,918 Thanked: 2,652 Times	re: Budget 2016 at a glance This one decision on EPF alone will potentially kill it for the government. There are some holy cows which are better left untouched. EPF was one such for the old folks as this country has no other social security system as such. Government ended up today creating a huge crater in that sole source of dependence for retirees who do not have a pension or any other sources of income. By the way, what happens to the PPF?
	() Thanks

29th February 2016, 20:44	#9
Chetan_Rao Team-BHP Support Join Date: Jul 2010 Location: Bangalore Posts: 5,872 Thanked: 24,032 Times	re: Budget 2016 at a glance The salaried employee is the softest target, so no surprises there. At a time where the only real long-term solution is to somehow increase tax contributor participation, the govt. is taking short-term measures to shore up revenue while pushing more and more of the salaried class away. I won't be surprised if this actually backfires badly over the longer term. I'll wait for further clarity on this and though I can't do anything about EPF contributions as long as I remain salaried, the govt. ain't getting any more of my voluntary PF and PPF money if I stand to lose ultimately. I'd put it where it does well for me, not for a govt. who isn't doing anything for me anyway. Last edited by Chetan_Rao : 29th February 2016 at 20:50.
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29th February 2016, 21:59	#11
Altocumulus Senior - BHPian Join Date: Jan 2012 Location: NCR/ KOL/ BLR Posts: 1,142 Thanked: 2,055 Times View My Garage	re: Budget 2016 at a glance So if I am on my notice period, in all probablities on a sabatical and will be withdrawing my PF, is this applicable for contributions after April 1 if passed ? Does that mean I won't be taxed on contributions till March 31 ?
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29th February 2016, 22:35	#14
saket77 Distinguished - BHPian Join Date: Dec 2012 Location: Ranchi Posts: 4,375 Thanked: 11,831 Times	re: Budget 2016 at a glance In order to push NPS as a product, I see the Govt. has cut the advantage of EPF which was giving a tough competition to NPS. Now since 40% of NPS withdrawal is now tax free, the Govt has brought it at par with EPF by taxing 60% EPF withdrawals. Not arguing over the style of investment in both. Slightly disappointing budget for middle class in my opinion on most fronts; yes, rent and 87a are there but I would have preferred an increase in slabs over them as that would have benefitted all rather than a group of selected. Regards Saket.
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