Sunday, July 13, 2014

Budget & its impact on Aam Aadmi

Tax exemption limit is increased by Rs.50,000. Tax exemption limit is increased to Rs.250,000 for resident upto 60 years of age and to Rs. 300,000 for senior citizen below 80 years of age. Further, to boost saving deduction under section 80C is increased by Rs.50,000 to Rs.150,000. Investment limit for PPF is now raised to Rs. 150,000. Thereby, maximum tax benefit available to resident in highest tax slab is Rs. 20,000.

A deduction on interest on housing loan is allowed upto Rs. 200,000 under section 24(b) in case of self occupied property. This will promote home ownership and give boost to real estate & construction companies, cement, steel & wood industry.

Mutual Funds
The holding period of unlisted securities and units of mutual funds is increased to more than 36 months to qualify as long term capital assets, against current provision of 12 months. If Indian companies hold such capital asset for period of less than 36 months, then they are liable to pay tax at rate of 30% plus surcharge & cess.

Without Indexation benefit, long term capital gain on transfer of mutual fund units (not being equity oriented funds subject to securities transaction tax) will be taxable @ 20% (plus surcharge and cess), against current tax rate of 10%.

The new provision will be applicable for FY 2014-15 & AY 2015-16.

Income and dividend distribution tax are now levied on gross amount declared as dividend, instead of current practice of paying tax on net proceeds. This would increase tax revenue for government. 

Few every day products that would be costlier and cheaper

With reduction in excise duty, it is now cheaper to buy following products
  • Footwear priced between Rs. 500 to Rs. 1000
  • Soaps (as duty on chemical used to manufacture soaps is reduced)
  • E-book readers, Desktop, laptops and tablet
  • RO based water purifiers
Inclusion of following services under preview of service tax and increase in excise duty, following goods / services are costlier to buy
  • Cigarettes & Tobacco products
  • Aerated drinks with sugar
  • Imported electronics products
  • Radio Taxi
(The list is not exhaustive)

Financial Inclusion
  • All households to be provided with banking services, with minimum 2 bank accounts for each household.
  • Single demat account for all financial asset
  • Uniform KYC Norms
  • Creation of new financial Asset - Real estate investment trusts (REITs) and Infrastructure Investment Trusts (InvITs)
  • Liberalized terms for GDR / ADR. Also introduction of Bharat Depositary Receipt.
  • Earmarked funds for new business, National accelerators and incubators, start-up village entrepreneurship, scheduled caste entrepreneurs