Tax Computation sheet & Budget Highlights 2016-17

Tax Computation & CTC Structure 2016-17

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Budget Highlights 2016

Key Changes of Budget 2016

• No change in basic exemption limits and tax rate for individuals and HUF.

• No change in 80C deduction limit.

• Tax rebate (section 87A) has been increased from Rs. 2,000 to Rs. 5,000, So now limit for individual and HUF whose total income is below 5, 00,000 Lakh has increased upto Rs. 3,00,000 from 2,70,000. This will lead to tax savings of INR 3,090 per annum.

• Surcharge rate has been increased from 12% to 15% for individual, HUF, AOP, BOI, Artificial judicial person having total income more than of Rs. 1 Crore.

• Deduction for additional interest of Rs. 50,000 per annum for loans up to Rs. 35 Lakh sanctioned in 2016-17 for first time home buyers, where the house cost does not exceed Rs. 50 Lakh. In overall context, first home buyer can get maximum deduction of interest on housing loan up to Rs. 250,000 in aggregate comprising of Rs. 2 Lakh under Section 24(b) of the IT Act and Rs. 50, 000 under section 80EE of the IT Act.

• The limit for deduction for rent paid under Section 80GG has been increased from Rs. 2000 per month to Rs. 5000 per month, to provide relief to those who live in rented houses and do not get HRA from the employers.

• The exemption in respect of employer contribution to superannuation fund has been increased to INR 150,000 from INR 100,000. This will result in tax savings in the range of INR 5,150 to INR 17,768.

• The tax exemption in respect of employer contribution to Provident Fund [PF] will be capped to INR 150,000 per annum or 12% of salary, whichever is lesser. This could result in a higher tax outgo for employees.

• Tax deduction at source that is triggered on PF withdrawal to apply where amount withdrawn exceeds INR 50,000 (earlier limit was INR 30,000).
• The budget contains The Income declaration scheme which will provide a window to the taxpayers who have not paid full taxes in the past to ensure compliance by paying 45% of declared income as tax and penalty. This will result in no further interest or penalty or prosecution. The scheme will be open from June 2016 to September 2016 and will be subject to specified conditions.

• Withdrawal up to 40% of the corpus at the time of retirement to be tax exempt in the case of National Pension Scheme (NPS). Annuity fund which goes to legal heir will not be taxable.

• With the proposed change, PF may become taxable to the extent of 60% of corpus on any withdrawal (to the extent it relates to contributions made after 1 April 2016) – some employees may not be impacted by this change depending on the monthly salary prescribed (further notifications awaited). The taxability may arise even when employee withdraws upon retirement at the prescribed age.

• Sec 24(b) provides that interest payable on capital borrowed for acquisition or construction of house property shall be deducted of Rs. 2, 00,000 if such acquisition or construction is completed within three years from the end of the financial year in which capital was borrowed. After budget three years is substituted to five years.

• The Budget contains The Income Declaration Scheme which will provide a window to the taxpayers who have not paid full taxes in the past to ensure compliance by paying 45% of declared income as tax and penalty. This will result in no further interest or penalty or prosecution. The scheme will be open from June 2016 to September 2016 and will be subject to specified conditions.

• Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend in excess of 10 Lakh per annum.

• A new levy called ‘Krishi Kalyan Cess’ will be imposed from 01/06/2016 on all the taxable services @ 0.5% of the value of taxable services. So now effective rate of service tax is 15%.
• The installments for advance tax payments is proposed to be revised to four installments (15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March) from three installments.

Income tax slabs & rates for financial year 2016-2017

The above points only consider main changes in income tax and service tax.