Budget 2016 has left behind a trail of disgruntled taxpayers with some strong pressure for rollback, particularly in case of EPF taxation. The measure in itself may not be “anti-people”, but the lack of clarity in budget speech definitely led to some misinterpretation and the Government had to clarify. Read details about why taxpayers are unhappy about certain proposals and what is the Government’s rationale behind them.Our pre-budget poll revealed a clear inclination towards change in tax slabs and increase in the exemption limit u/s 80C. However, none found way to the Finance Bill 2016.
Small taxpayers got some relief in the form of rebate u/s 87A, whereby the limit is increased from INR 2,000 to INR 5,000. Rent deduction u/s 80GG applicable to individuals not in receipt of HRA is also increased.
“The principal amount will not be taxed and will continue to remain tax exempt on withdrawal. What we have said is 40% of the interest accrued on contributions made after April 1 will be tax exempt and its remaining 60% will be taxed. We are worried about people blowing off the entire 100 per cent amount on retirement and not investing in pension products. Otherwise, the responsibility comes on government to take care of.”
Additionally, there are some changes proposed in the advance tax schedule and time limits u/s 139.
Budget 2016 will also push up car prices in all categories. On the other hand, increased service tax at 15% will the price of all services.
According to a feature in Livemint, “Only 5.5% of earning individuals pay tax, in part because of the government’s generous economic policies.” Combined with this, the rampant tax evasion in India has skewed the tax burden with about 2% taxpayers paying 63% of income tax. Fiscal policy, therefore, requires a two-pronged approach of including more taxpayers and increasing compliance.Indirect tax impact on various goods and services: