20 The Finapolis l APRIL 2016 NAVEEN KUKREJA
by invite
What the Budget Means for the Salaried Class and Small Tax Payers
F
inance Minister Arun Jaitley’s third Budget was predominantly tilted towards India’s economically weaker sections, infrastructure, agricultural, and social sectors. While the previous Budget had a lot to offer to the middle class, the conservative fiscal approach of this year’s Budget meant that it had little to offer to middle and upper classes in the form of changing tax slabs and providing tax exemptions. In fact, this year’s Budget increased the surcharge on income tax (for people having taxable income of more than Rs 1 crore) from 12% to 15%. Toeing the overall pro-poor theme of this year’s Budget, the government’s proposal to increase the tax rebate, waive-off service tax on homes and increase deductions on rent paid etc. are clearly meant to benefit economically weaker segments of our society.
The Budget did well by increasing tax rebates, increasing tax deduction on rent paid, waiving off service tax on small homes and increasing tax deduction for home loan interest. These steps fit well with the overall objective of providing relief to lower-income groups and housing for all Let’s look at some of the important implications of this year’s Budget on salaried class and small tax payers:
Bringing tax parity among pension schemes The government provided a huge relief to the salaried people by withdrawing the original Budget proposal to partially tax EPF withdrawals. It will continue to be an attractive investment avenue, exempting tax in all three stages (contribution, interest and withdrawal). However, if an unemployed person wishes to withdraw money from his EPF account, he can only withdraw his own contribution and interest earned on it. The employer’s contribution can only be withdrawn once this person reaches 58 years. The proposal to exempt 40% of the NPS corpus remains in place. The original proposal was to tax 60% on the interest earned on contributions made after April 1, 2016, during the withdrawal of EPF corpus. Apart from bringing in parity in the taxation of EPF and