After the poor performance of the Congress Party in five state elections, good politics may overpower good economics and expectations are that the Congress Party-led United Progressive Alliance may announce a very populist budget for FY2013. A populist budget may be bad news for the market in general but it could include some goodies for the general investor.
Any finance professional can tell you that a company’s income is more tax efficient than an individual’s. The Parliamentary Standing Committee on Finance has recommended reducing this anomaly by way of reducing the number of exemptions applicable to companies rather than hiking the burden of the salaried class further.
There could be a bonanza for the salaried class in this budget. The panel has suggested hiking the income tax exemption limit to Rs3 lakh from the current Rs1.8 lakh and also suggested changes in slabs on which income tax will be calculated. It says that income between Rs3 lakh and Rs10 lakh should be taxed at 10%; the income between Rs10 lakh and Rs20 lakh at 20%; and the income above Rs20 lakh at a flat rate of 30%. Currently, income up to Rs1.8 lakh is exempt; tax is levied at 10% on income between Rs1.8 lakh and Rs5 lakh, a 20% tax is imposed on income between Rs5 lakh and Rs8 lakh; and a 30% tax is levied on income above Rs8 lakh. The changes in the tax slabs would also leave a lot of investible surplus funds in the hands of investors. Leaving more money in the hands of the citizens is also a move to keep consumption strong in the country and to encourage people to invest in a tax efficient manner at the same time. It also enables accelerated participation of retail investor in the equity market which is good for the country in the long run.
Apart from the above exemptions the panel is encouraging investors to buy adequate risk cover for life and health, and save tax on it too. The panel pitches for enhancing the deduction proposed in the Direct Tax Code for expenses incurred on life insurance, health insurance and fee paid of children from Rs50,000 to Rs1 lakh and has recommended a separate window of Rs75,000 for health insurance premium paid for dependent parents and higher education.
Looking at the way real estate prices have rocketed in most parts of the country in the past few years, the panel has also suggested raising the wealth tax ceiling to Rs5 crore from the current Rs1 crore.
The trader fraternity may also get a slice of the thrill in the form of a reduction in the securities transaction tax ( STT) rates, which they pay on buying and selling of shares. The panel suggests the finance ministry remove the STT completely. Traders currently pay STT in the 0.025% to 0.25% range depending on the security traded. In place of STT the capital gains tax of 10% flat is suggested to be reinstated over one-year tenure of investment. This move if announced could boost trading volumes in the equity market and reduce costs too.
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Any finance professional can tell you that a company’s income is more tax efficient than an individual’s. The Parliamentary Standing Committee on Finance has recommended reducing this anomaly by way of reducing the number of exemptions applicable to companies rather than hiking the burden of the salaried class further.
There could be a bonanza for the salaried class in this budget. The panel has suggested hiking the income tax exemption limit to Rs3 lakh from the current Rs1.8 lakh and also suggested changes in slabs on which income tax will be calculated. It says that income between Rs3 lakh and Rs10 lakh should be taxed at 10%; the income between Rs10 lakh and Rs20 lakh at 20%; and the income above Rs20 lakh at a flat rate of 30%. Currently, income up to Rs1.8 lakh is exempt; tax is levied at 10% on income between Rs1.8 lakh and Rs5 lakh, a 20% tax is imposed on income between Rs5 lakh and Rs8 lakh; and a 30% tax is levied on income above Rs8 lakh. The changes in the tax slabs would also leave a lot of investible surplus funds in the hands of investors. Leaving more money in the hands of the citizens is also a move to keep consumption strong in the country and to encourage people to invest in a tax efficient manner at the same time. It also enables accelerated participation of retail investor in the equity market which is good for the country in the long run.
Apart from the above exemptions the panel is encouraging investors to buy adequate risk cover for life and health, and save tax on it too. The panel pitches for enhancing the deduction proposed in the Direct Tax Code for expenses incurred on life insurance, health insurance and fee paid of children from Rs50,000 to Rs1 lakh and has recommended a separate window of Rs75,000 for health insurance premium paid for dependent parents and higher education.
Looking at the way real estate prices have rocketed in most parts of the country in the past few years, the panel has also suggested raising the wealth tax ceiling to Rs5 crore from the current Rs1 crore.
The trader fraternity may also get a slice of the thrill in the form of a reduction in the securities transaction tax ( STT) rates, which they pay on buying and selling of shares. The panel suggests the finance ministry remove the STT completely. Traders currently pay STT in the 0.025% to 0.25% range depending on the security traded. In place of STT the capital gains tax of 10% flat is suggested to be reinstated over one-year tenure of investment. This move if announced could boost trading volumes in the equity market and reduce costs too.
....more info