People earning more than Rs1 crore will now see the surcharge on income tax go up to 15% from 12%, while for an annual dividend income of Rs10 lakh or more, an investor will pay DDT of 10%
Mint Money team | First Published: Mon, Feb 29 2016. 01 50 PM IST | Live Mint
New Delhi: The much-anticipated inheritance tax gave the country a miss one more year. Neither did the dreaded capital gains tax raise its head. The tax slabs did not change, nor did the tax rates or the exemption.
The big changes for your money are at the fringes—both at the lower and the upper fringe. People earning more than Rs.1 crore will now see the surcharge on income tax go up to 15% from 12% in the current fiscal year.
The dividend distribution tax (DDT) makes a comeback. For an annual dividend income of Rs.10 lakh or more, the investor will pay a DDT of 10%. This means that at an assumed dividend of 10%, an investor will need to have a portfolio of Rs.1 crore, to begin paying this tax. This is in addition to the 28.84% that the company already pays on this income.
At the other end of the spectrum, there is relief for the small tax payer. The rebate of Rs.2,000 is now Rs.5,000 for people who earn Rs.5 lakh or less in a year. For professionals who do not get the benefit of a house rent allowance (HRA) deduction, the current deduction of Rs.24,000 will now be Rs.60,000 for those who live in rented houses.
The big change has come in the pension space, with the National Pension System finally getting partial parity with the other schemes. 40% of the corpus amount at maturity will not be taxed. Since 60% of the corpus is available as a lump sum at age 60, 20% will still be taxed. The compulsory annuity will continue to be taxed.
In another major move, superannuation funds and recognized provident funds, including employees provident fund (EPF), will give just 40% of corpus tax-free status, unlike the current 100% tax-free status. But this is not retrospective, but on corpus created from 1 April 2016. To encourage annuity buying, the service tax on a single premium annuity (insurance) policies will fall from 3.5% to 1.4% of the premium paid.
Source : http://goo.gl/wxJDdr