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Tuesday, 1 March 2016

Budget 2016-17: Highlights

The Budget for 2016-17 was presented yesterday and to the disappointment of the Salaried class there has been no revision in the existing Tax Slab nor any hike in the tax deduction available various Section. Moreover, the biggest shocker for over 5 crore EPF account holders was the announcement that now major chunk of the retirement corpus is taxable. Even Superannuation Funds (Retirement Funds like National Pension Scheme) will have tax implication at the time of maturity/withdrawal.
The Budget aimed at addressing the needs of the poor, people involved with the agriculture sector and development of the rural areas was very encouraging.  The notable disappointment was that the middle class hardly had anything to cheer, on contrary the announcement to tax the retirement benefit was a major blow to majority of the population. In my opinion, if one needs to ensure parity between National Pension Scheme and Employees Provident Fund then both should be exempted from any Tax. In any case, the Salaried people can't do much about tax, now with their hard earned savings also being liable to be taxed, it is going to be tough for them.

Budget 2016: Personal Finance Perspective

Let’s look at the major announcements made in the budget and its implications as far as Personal Finance is concerned:-
  • Tax Rebate hiked to Rs 5,000/- U/S 87A which would benefit Individuals whose Taxable Income is less than Rs 5,00,000/- annually.
  • Tax Deduction Limit increased to Rs 60,000/- U/S 80GG (House Rent Allowance) from Rs 24,000/- currently.
  • Additional Exemption of Rs 50,000/- for Housing Loans upto 35 lakh, provided cost of house is not above 50 lakh. 
  • Luxury Cars to cost dearer as 1% additional service charge levied on cars over 10 lakhs and cash purchases of goods and services in excess of Rs 2 lakhs will also attract additional service charge of 1%.
  • National Pension Scheme withdrawal will enjoy a Tax Exemption of 40% of the total corpus. Currently 100% is taxed.
  • Employees’ Provident Fund also comes under the purview of Tax as only 40% of the Subscriber’s total corpus will be exempt from tax. Currently fully exempt from Tax. (Revised on 03rd March,2016, No tax to be levied on EPF.)
  • Government will contribute 8.33% towards Employees’ Pension Scheme (EPS) of all unskilled and semi skilled workers joining work in the new financial year for the first 3 years. Thereby individuals may enjoy a higher take home salary.
  • Government to provide health insurance of upto Rs. 1 lakh per family; top up of Rs. 30,000 for people above 60 years. 3,000 stores to be opened for generic drugs.

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