The first full budget of the Modi government was presented by finance minister Mr. Arun Jaitley on 28th February 2015. While there is no change in personal income tax rates, there are many suggestions in line with the Make in India call of the Prime Minister.
The highlights of the budget are:
- Fiscal Deficit seen at 3.9% of the GDP for the year 2015-16 & GDP growth is seen between 8 and 8.5 % year on year.
- Expect consumer inflation in the range of 5% by March, which can result in further rate cut by RBI & Revenue deficit at 2.8% of the GDP
- Merger of Commodities regulator Forward Markets Commission (FMC) with SEBI & GAAR to roll out from 1st April. 2017 prospectively.
- Abolish wealth tax and reduce the corporate tax from 30% to 25% in the next 4 years.
- Propose to implement GST from 1st April. 2016 & Plan to increase the rate of service tax to 14% from the current rate of 12.36%.
- Investment in infrastructure will go up by 70,000 Crore in 2015-16.
- Plan to introduce tax free infrastructure bonds, gold deposit accounts and sovereign bond.
- Donations to the Swachh Bharat Kosh and Clean Ganga Fund will be eligible for a deduction of hundred per cent from the total income under section 80G.
Major changes in Personal Finance
- Tax exemption for the health insurance premium under Section 80D is increased to 25000. You will get another 25,000 deduction for health insurance premium paid for your parents. If either of the parents are senior citizen, this deduction will be 30,000. For those aged above aged 80, if there is no health insurance, they will get an exemption of 30,000 towards medical expenses.
- Under Section 80CCD, you can invest up to 50,000 in a year in NPS and get tax deduction. This is in addition to the 1.5 Lakhs under section 80C.
- Monthly transport allowance up to 1600 is tax free.
- If you have spend for the treatment of a disabled dependant or invested in an approved scheme for the welfare of the disabled dependent, you are eligible for deduction of 75,000 per year. If the disability is above 80%, the amount is 1.25 Lakhs.
- Sukanya Samriddhi account scheme – Contribution of 1.5 Lakhs per year made under this scheme will be eligible for deduction under Section 80C. Interest on deposits and withdrawal from such scheme are exempt from tax.
- From 1st June. 2015, there will be TDS at the rate of 10%, if your interest income from Recurring Deposit (RD) is above 10,000 in a year.
- As of now, there is no TDS from the interest paid on corporative bank deposit. But this will change from 1st June. 2015. There will be TDS here also just like any other bank deposit.
- There will be no service tax for the premium paid under Varishtha Pension Bima Yojana to make it attractive for senior citizens.
- There will be no capital gain tax in the case of mutual fund mergers.
- The surcharge of 10% on the dividends under debt mutual funds is increased to 12%. So, the dividend distribution tax (DDT) will be 28.84 % instead of the current rate of 28.325%. DDT is paid by the fund before paying dividend under Debt funds.
- Employees can now opt for EPF or NPS as per their choice. If you are risk averse, you can continue with the EPF or you can switch to the NPS scheme for better returns. This proposal will be implemented later after discussion with all stake holders.
Your annual salary up to 7 Lakhs will be tax free now as per Union Budget 2015 -16
You can avail the following deductions/exemptions from your annual salary and pay NIL tax if your gross salary is 7, 09,200.
- Section 80 C – 1,50,000
- Section 80D ( Health insurance for self and family) – 25000
- Interest paid on home loan (self occupied house) – 2,00,000
- Section 80D ( contribution to NPS) – 50,000
- Transport allowance – 19,200
- Medical reimbursement – 15,000
- Basic exemption – 2,50,000