Budget & Your Money Ventura Securities Ltd. 1
Union Budget Impact on Individual No change in Tax Slabs. Surcharge increased from 12% to 15% for income above Rs. 1 crore No change in 80C limit 10% tax on individuals receiving dividend exceeding Rs. 10 lacs. Withdrawal of 40% corpus in NPS now made tax-free March 08, 2016 1
Union Budget Impact on Individual Individuals to pay advance tax installment from 15 June onwards previously was from 15 September Service Tax to increase to 15% due to introduction of 0.5% additional tax called Krishi Kalyan Cess Tax-free bonds of Rs. 31,300 crores will be raised during FY 2016-17. March 08, 2016 2
EPF withdrawal rules w.e.f 10th Feb 2016 Particulars EPF Withdrawal Existing rule The EPF members (employees) can withdraw the full EPF balance after 60 days of unemployment. EPF withdrawal rules w.e.f10th Feb 2016 Full EPF balance cannot be withdrawn. Employee can withdraw his/her contributions + interest portion only on cessation of employment. Employer s portion can be withdrawnonly at age of retirement(58 years). Retirement Age 55 years 58 years Provisions related to Taxation/ TDS TDS Rate Withdrawal before 5 years, employee contribution is taxable. TDS is also applicable if the amount is greater than Rs. 30,000/- PAN submitted -@10% PAN not submitted @ 34.6% Along with PAN 15G/15H Submitted NIL TDS applicable limit is being raised from Rs.30,000 to Rs.50,000/- No change March 08, 2016 3
NPS: Current Features & changes proposed in budget 2016-17 Particulars Deduction for Employee Contribution Deduction for Employer Contribution Taxation on Withdrawal Taxation on Annuity Tier I Account Employee contribution up to 10% of Salaryis eligible for deduction under Section 80C within the Rs 1.5 lakhlimit The employer's contribution up to 10% of Salaryis eligible for deduction under Section 80CCD(2) without any limit Post attaining 60 years Maximum 60% of the corpus can be withdrawn. Taxable Taxable Changes Proposed in Budget 2016-17 No Change No Change Maximum 60% of the corpus can be withdrawn. Up to 40% of the corpus made tax exempt. No Change March 08, 2016 4
Example : Contribution uptors. 25,000 p.m. (Rs. 3 lakhsp.a.) each (Employee and Employer) Particulars Assumed Contribution (per month) (Employee + Employer) Contribution (per annum) (Employee + Employer) (Rs. In lakhs) Contribution in 20 years (Employee + Employer) (Rs. In lakhs) Current (Rs.) Proposed (Rs.) 50,000 50,000 6.00 6.00 120.00 120.00 Capital Gains@10.25% p.a.*(rs. In lakhs) 183.21 183.21 Tax @30.9% on Withdrawable corpus(rs. In lakhs) 56.22 18.74 Net Corpus in hand(rs. In lakhs) 246.99 284.47 Yield 7.03% p.a. 8.31% p.a. *Note: Allocation to Equity (50%), Corporate debt (25%) and Government bonds (25%). Assumed rate of return for Equity @12% p.a., Corporate debt@9% p.a. and Government bonds@8% p.a. March 08, 2016 5
Key Highlights Tax on Dividends: Current : Entire amount was tax-free. Proposed: Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend from domestic companies exceeding Rs.10 lakh per annum with effect from 01 st April 2016. For example, if the dividend amount is Rs 11 lakhs, earlier the entire amount was tax free. Now, there will be tax of 10% on the entire amount Rs 11 lakhs which comes to Rs. 1.1 lakhs. March 08, 2016 6
Personal Tax - Individuals Tax slabs (Rs.) Tax rate (%) Effective Tax rate (%) Up to 2,50,000 Nil Nil 2,50,001-5,00,000 10 10.3 5,00,001-10,00,000 20 20.6 Above 10,00,000 30 30.9 Above Rs. 1 crore 30 35.54* *Increased from 34.61% due to additional surcharge of 15% (increased from 12%) for individual earning more than Rs. 1 crore p.a. March 08, 2016 7
Personal Tax Slab - Senior citizens Tax slabs (Rs.) Tax rate (%) for Senior Citizens (Age 60 years or more but less than 80 years) Tax slabs (Rs.) Tax rate (%)For Very Senior Citizens (Age 80 years or more) Up to 3,00,000 3,00,001-5,00,000 5,00,001-10,00,000 Nil 10.3 20.6 Upto Rs. 5,00,000 Nil 5,00,001-10,00,000 20.6 Above 10,00,000 30.9 Above Rs. 10,00,000 30.9 March 08, 2016 8
Deductions Section Particulars Current Post Budget Fourth schedule to IT act in Part A Contribution of employer to provident fund Upto 12% of the Salary exempt from tax No Change 80CCD Contribution to National Pension System (NPS) Post attaining 60 years 60% can be withdrawn which is fully taxable. Also, annuity fund which goes to legal heir is fully taxable. Post attaining 60 years 60% can be withdrawn of which upto 40% amount is exempt from tax. Annuity fund which goes to legal heir is fully taxable 87A Tax Rebate for individual with income upto Rs. 5 lakhs Tax rebate of Rs 2,000 Tax rebate limit raised to Rs 5,000 March 08, 2016 9
Tax impact on your investments Investment Equity Shares Mutual Funds Tax incentive when investing None Investment in ELSS funds is eligible for tax deduction within the overall cap of Rs. 1.5 lacs available under Sec. 80C Tax implication of Dividend Additional tax at the rate of 10% of gross amount of dividend will be payable by the recipients receiving dividend from domestic companies exceeding Rs.10 lakh p.a. Dividend from non-equity oriented funds would attract DDT. Tax implication on Sale LTCG Nil after 1 yr STCG taxable @15.45% if sold within 1 yr Equity-oriented : LTCG Nil after 1 yr STCG taxable @15.45% if sold before 1 yr Debt-oriented: LTCG taxable @20.6% (with indexation) if sold after 3 yrs STCG taxable as per tax slab if sold before 3 yrs LTCG - Long term capital gain March 08, 2016 10 STCG - Short term capital gain
Tax impact on your investments Investment Tax-Free Bonds Debentures Tax incentive when investing No tax exemption at the time of investment Tax implication of Interest Interest from notified tax-free bonds is exempt from tax Interest income from debentures is taxable. However, no TDS if held in demat Tax implication on Sale LTCG taxable @10% (without indexation) [if held more than 1 yr] STCG taxable as per tax slab (if sold before 1 yr) Bank/ Company Fixed Deposits Investment in 5 year tax saving bank deposit is eligible for deduction within the overall cap of Rs. 1.5 lacs available under Sec 80C Interest income will be taxable as per the tax slab of the individual. TDS would be deducted as applicable Not Applicable March 08, 2016 11
Disclaimer Ventura Securities Limited. Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli(W), Mumbai 400079 This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation. March 08, 2016 12