|
|
|
Personal Finance
|
Changes
in
Nutshell |
|
Surcharge
on
income
tax |
17%*,
if
taxable
income
exceeds
Rs
1,
50,000
(In
other
cases
15%) |
2% |
All
surcharge
stands
withdrawn
except
the
surcharge
for
Gujarat
earthquake |
|
Interest
on
Capital
borrowed
for
acquiring/
constructing
one
self-occupied
house
property |
Rs
1,00,000 |
Rs
1,50,000 |
The
acquisition
or
the
construction
of
the
house
property
should
be
completed
before
April
1,
2003. |
|
Deduction
under
Section
80L |
Rs
12,000 |
Rs
9,000 |
Increase
in
effective
tax
rate
paid
by
investor |
|
Exemption
from
deduction
of
tax
at
source
on
interest
other
than
interest
on
securities |
Rs
10,000 |
Rs
2,500 |
The
provisions
are
effective
from
June
1,
2001
and
could
lead
to
increase
in
small
deposits
with
Banks
and
housing
finance
companies. |
*Inclusive of levy of 2%-surcharge for Gujarat earthquake
Budget Implications
The Union Budget 2001-2002 has effectively lowered the tax burden of assessees by removing the entire surcharge, except, however for the surcharge of Gujarat earthquake. No changes are made to the rates of income tax. An attempt has also been made to increase the taxpayers base by extending the one by six tax criteria to all urban areas as per census of 1990-1991. No changes are suggested in respect of rates of capital gains tax. Deduction available under Section 80L is now reduced to Rs 9,000, resulting in increase of the tax burden. At the same time, long-term capital gains tax liability can be mitigated by making investments in eligible public issues of Indian companies.
The impact of the budget on personal finances can be broadly summarized as under:
Investments Related:
- Income distribution by corporates (dividends) and by non-equity-oriented funds of Unit Trust of India/Mutual Funds on or after June, 2001 will be subject to a reduced distribution tax of 10.2% as against 22.6% earlier.
- Long-term capital gains on listed securities or units of Mutual Fund/Unit Trust of India shall be exempt from tax if such capital gains are invested in equity shares forming part of an eligible issue of capital made by a public company as a part of public offering (Section 54ED). The exemption will be withdrawn if such investments are sold within a period of 12 months.
- Capital gains tax exemption under Section 54EC is now also available by making investments in bonds issued by the Rural Electrification Corporation Limited.
Salary Taxation:
- Rebate on LIC premia, contribution to PF, etc under Section 88 is increased from Rs 20,000 to Rs 30,000 in case of assessees who have salary income upto Rs 1,00,000.
- Commission and brokerage are now subjected to deduction of tax at source @10% of such commission or brokerage, in case, the income exceeds Rs 2,500 p.a.
- Exemption of amounts upto Rs 5,00,000 received under VRS extended to Central and State Government employees.
- Any amount received by a person, prior to his joining any employment or upon leaving any employment, is now taxable as salaries. This will impact joining bonuses and golden handshake payments.
- Income arising out of stock options to employees (clarified as taxable only on sale in the last budget) will be exempt only when the Scheme of ESOP/ESPS is in accordance with the regulations framed by SEBI. Accordingly, non-SEBI schemes will be impacted.
House Property:
Deductions under income calculated from House Property would now be restricted to the following:
1) 30% of the annual value; and
2) Interest payable on borrowed capital.
All other deductions hitherto available are withdrawn.
Information Courtesy: RSM & Company
Rediff-CRISIL Budget Impact Analysis
Budget 2001
Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.
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