Initially, the entire focus (and consternation) of taxpayers especially the employee class on Union Budget 2016 was on the proposed tax on provident fund withdrawal. However, since that particular proposal has been withdrawn and at least for now, it is a closed chapter. Therefore, this week we shall look at a few other Budget proposals that while being significant may not have been suitably highlighted in the media on account of the entire thunder and lightning of PF tax.
Increase in time period for claiming deduction of interest on house property loan This is a provision that will favourably affect most home buyers.
Currently, the interest deduction of Rs. 2 lakh on housing loans is available only if the property is purchased or constructed within 3 years from the end of the FY in which the loan was taken.
This 3 year period has been extended to 5 years now. So even if the construction is delayed a bit, there is no danger of losing the interest deduction.
Presumptive taxation scheme for professionals A person engaged in a profession such as legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration or any other profession as is notified by the Board in the Official Gazette and whose total gross receipts do not exceed Rs. 50 lakh in the FY has been given the option of declaring flat 50% of his receipts as his income (profit) and pay tax thereon. No other deduction will be available in such cases. No books of accounts need be maintained – obviously audit need not be (cannot be!!) done.
This proposal will greatly reduce the compliance burden of the small tax payers while simultaneously facilitating the ease of doing business
Filing of return of Income This is a proposal that could just fly under the radar and catch a taxpayer unawares. So be careful.
Currently, the law provides that a person who has not filed his tax return by the due date may file the same at any time before the expiry of one year from the end of the relevant assessment year (or before the completion of the assessment), whichever is earlier.
There are certain amendments proposed.
First of all, if a person earns more than the basic exemption limit (currently Rs. 2.50 lakh) from exempted long-term capital gains from equity and equity MFs, then such person shall also be liable to file his or her return of income before due date.
Also, if a person has not furnished his return within the due date may now submit the return at any time before the end of the relevant assessment year and not one year from the end of the relevant assessment year as the case was earlier.
Amendment to Section 50C where sale consideration is fixed prior to the date of registration of immovable property Lastly, we come to a practical almost utilitarian provision. Under the existing provisions contained in Section 50C, in case of transfer of an immovable property, where the sale consideration is lower than the stamp duty value then such stamp duty valuation will have to be taken as the full value of consideration for the purposes of computation of capital gains. However, this provision does not accommodate a situation where the seller for example say enters into an agreement to sell the property much before the actual date of transfer of the property and where the sale consideration is fixed in such agreement.
Therefore, section 50C is being amended so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of computing the full value of consideration.
However, this would be subject to the condition that such consideration, or a part thereof, has been paid by way of an account payee cheque / draft or use of ECS, on or before the date of the agreement for the transfer of such immovable property.
This then rounds up our initial coverage of Budget 2016. However, if readers have any questions or need any clarifications, please feel free to write in.
(The authors may be contacted at wonderlandconsultants@yahoo.com)
