Budget 2013: Tax Impact of Budget on Common Man in India

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The Indian Finance Minister P. Chidambaram presented the India Budget 2013 on 28th February 2013 and the following are the major tax changes that would impact the Indian Common Man:-

1. TDS of 1% on Property

With an aim to curb the Black Money that is being circulated in the Real Estate Market, the Finance Minister in his Budget 2013 has introduced the levy of TDS on Immovable Property @ 1% on all Transactions over and above Rs. 50 Lakhs u/s 194IA (excluding the Agricultural deals). This levy would also help the government in collection of Capital Gains Tax. This new levy would be applicable from 1st June 2013 onwards.

2. Income Tax Slab Rates

The Income Tax Slab Rates for the year financial year 2013-14 have been left unchanged and are the same as Income Tax Slabs for the year 2012-13

However, the Finance Minister while announcing the Budget 2013 announced a tax credit of Rs. 2000 for all Taxpayers earning Income below Rs. 5 Lakh p.a.

budget-tax

3. Taxing the Super Rich

As expected, the govt has levied a surcharge of 10% on all Individuals earning Income above Rs. 1 Crore p.a.  It was highly expected by the Media that the Finance Minister in Budget 2013 would try to levy additional tax on the super rich and this has been done by way of levy of Surcharge @ 10% on Individuals earning Income above Rs. 1 Crore p.a.

There are more than 42,800 Individuals/HUF in India who in the previous year disclosed Income of more than Rs. 1 Crore p.a.

4. Additional Deduction of Rs. 1 Lakh for Interest on Home Loan

The Finance Minister in his Budget 2013 announced Rs. 1 Lakh as additional deduction for Interest on Home Loan u/s 80 EE for first time Home Buyers. The deduction shall only be allowed provided that the new Home Loan is taken in the year 2013-14 and the Loan amount is less than Rs. 25 Lakhs and the House Value is less than Rs. 40 Lakhs.

This additional deduction would be over and above the Rs. 1.5 Lakh deduction currently allowed for Interest on Home Loan

5. RGESS more attractive:

The Limit for Investing in Rajiv Gandhi Equity linked Saving Scheme has been increased from Rs. 10 Lakh to Rs. 12 Lakhs. The RGESS has even been made more attractive  and been liberalised to enable first time investor to invest in Mutual Funds as well as Shares and they can do so not only in 1 year but in 3 successive years.

6. Defective Income Tax Return

An Income Tax Return funished without clearing all Tax dues (along with Interest) would be regarded as a Defective Return w.e.f 1st June 2013. However, if all the tax dues are cleared within 15 days of Intimation of Defective Return by the Assessing Officer, the return would not be considered as a Defective Return.

7. STT reduced, CTT introduced

To encourage the public to invest in Stocks, the Finance Minister of India while announcing the Budget 2013 announced reduction in STT  on Mutual Fund redemptions from 0.25 to 0.001 percent. ETF sale on exchanges has also been reduced from 0.1 to 0.001 percent.

The Finance Minister in his Budget 2013 has introduced Commodities Transaction Tax (CTT) in a limited way. The FM proposes to levy CTT on non-agricultural commodities futures contracts at the same rate as on equity futures which stands at 0.01 percent of the price of the trade.

Budget 2013: Things that got Costlier

  1. SUV’s: Excise Duty on SUV’s has been raised in the Budget 2013 from 27% to 30% as they occupy greater road and parking space and are ought to be taxed higher. This amendment is applicable to all new SUV’s except SUV’s purchased for the purpose of use as a Taxi.
  2. Imported Cars & Motorcycles: Basic customs duty on new passenger cars and other motor vehicles costing more than USD 40,000 and/or engine capacity exceeding 3,000cc for petrol run vehicles and exceeding 2500 cc for diesel run vehicles has been hiked from 75% to 100%. Likewise, duty on yachts and similar vessels has also been raised from 10% to 25%.
  3. Mobile Handsets: Excise duty on Mobile Handsets priced above Rs 2,000 has been raised from 1% to 6% in Budget 2013 but the concessional excise duty of 1% and has been kept unchanged in the case of low priced phones.
  4. Cigarettes, Cigars, Cheroots & Cigarillos
  5. Marble Tiles & Slabs: Excise Duty raised from Rs. 30/sq ft to Rs. 60/sq ft
  6. Eating out: Service Tax to be levied on all Air-Conditioned Restaurants. Earlier Service Tax was only levied on Restaurants which were Air Conditioned and had license to serve alcohol. However, in Budget 2013 the alcohol mandate has been removed and now all Air Conditioned Restaurants are liable to charge Service Tax.
  7. Silk Clothes: Clothes made of Imported Raw Silk will get expensive as Custom Duty on Raw Silk of all grades has been increased from 5% to 15%
  8. Service Tax on Parking Charges: Services provided by way of Vehicle Parking to the General Public has been moved out of the Service Tax Mega Exemption Notification and therefore these Services are now taxable. So if you were earlier paying Rs. 50 for Car Parking in a Mall, you would now also be required to pay Service Tax @ 12.36% on Rs. 50 and therefore the total amount payable would be Rs. 56

Budget 2013 also increased the duty free allowance in respect of jewellery for an Indian passenger who has been residing abroad for over one year or a person who is transferring his residence to India from Rs.10,000 to Rs.50,000 in case of a gentleman passenger and from Rs.20,000 to Rs.1,00,000 in case of a lady passenger.

After the Announcement of the budget, the Finance Ministry releases a detailed memorandum explaining the budget. The Memorandum for Budget 2013 can be downloaded from the following links:-

  1. Provisions relating to Direct Tax
  2. Provisions relating to Indirect Tax

A Personal Finance enthusiast, Karan is the founder of charteredclub.com and loves to discuss about Money related matters.