Budget 2015 has brought lots of changes in the
direct as well as indirect taxes. Most of the changes have already been
implemented but few are yet to become operative. These changes will come into
effect from 1st June, 2015.
Let’s see the changes which are going to get applicable from 1st June, 2015.
Changes in Provisions of TDS and Rate of Service Tax w.e.f 1st
June, 2015
1. TDS on Provident Fund Withdrawal
Effective from 1st June, 2015, TDS @ 10% would be deducted
from the money withdrawn from your provident fund before 5 years of continuous
service. Earlier, withdrawal from the provident fund account before completion
of 5 years of continuous service did not attract TDS but taxpayer is required
to show the same under the head of income from other sources and pay tax as per
his/her tax slab.
However, withdrawal up
to Rs.30,000 is tax-free and no TDS will be deducted from the amount withdrawn.
Further, if you transfer your EPF balance from one employer to another, the
period of the service with the previous employer shall be counted while calculating
the 5 years of continuous service.
Few other cases of
tax-free withdrawal irrespective of the amount are:
1.
Where the business of the employer is discontinued.
2.
Employee is severely ill.
One thing to keep in
mind is that while making withdrawal you should quote your PAN card else the
rate of TDS shoots-up to flat 30% i.e. highest tax slab rate.
2. TDS on Recurring Deposits Interest Income
Another disappointing
change in budget 2015 is bringing recurring deposits interest under the ambit
of TDS. Now, if the interest earned from the recurring deposits exceeds the
threshold limit of Rs.10,000, TDS @ 10% would be deducted. In case you fail to
mention your PAN, the rate of TDS would be 20%.
However, the impact of
the amendment is NIL on the taxpayer because earlier taxpayers had to include
the recurring deposits interest income under the income from other sources and
pay tax accordingly and now the same will be done by the bank on behalf of the
taxpayer.
This amendment would
cause problem only to the taxpayers who does not have any taxable income or
having total income below the taxable limit. They would now be necessarily
required to fill Form 15G (non-senior citizens) or Form 15H (for senior
citizens) to request the bank not to deduct TDS.
3. TDS on Fixed Deposit Interest Income
Fixed Deposit interest
is always taxable but a liberty of making fixed deposit in different branches
of the same bank and gets escaped from the TDS provision, if the interest
income at each branch falls below Rs.10,000, was there before budget 2015.
Budget 2015 has taken
this liberty from the taxpayer by making a small change in the provision. Now
interest from fixed deposit from all branches of the same bank will be summed
up to calculate the threshold limit of Rs.10,000 under section 194A of the
Income-Tax Act.
You can duly submit
Form 15G or Form 15H to avoid the deduction of TDS from your interest income,
if your total income falls below the taxable income limit.
4. New Service Tax Rate of 14%
Hiking Service tax to
14% is the most controversial change in the budget 2015. As there are talks
going on implementing GST (Goods and Service Tax) from the April, 2016, increasing
of service tax hurriedly is not understandable.
Noticeably no date of applicability was
announced in budget 2015 but on 19th May vide Notification no. 14.2015,
finance ministry announced the applicability of the new service tax rate would
be 1st June, 2015.
The new service tax of 14% is flat rate and
both education cess or higher education cess get subsumed in the new service
tax rate. This means service tax @ 14% will only be applicable on the services
provided on or after 1st June 2015.
Before this date Service Tax @ 12% would be levied on all the services
provided.
The new service tax applicable on the various
services w.e.f. 1st June, 2015 is as
follows:
§ Restaurant – 5.6%
§ Hotel Lodging –
8.4%
§ Vehicle Rent – 5.6%
§ Hall with Catering
– 9.8%
§ Catering – 8.4%
§ Building Repairing
– 9.8%
§ Civil Contract with
Material – 5.6%
§ Building
Residential – 3.5%
§ Building Commercial
– 4.2%
§ GTA Transports –
4.2%
§ All other Services
– 14%
5. TDS on Life Insurance Proceeds
Provision of deducting
TDS @ 2% from the life insurance proceeds above Rs.1 lakh was introduced in
budget 2014 under Section 194DA. Budget 2015 has granted a relief to the policy
holder that if his/her income is not chargeable to the tax, he/she can furnish
Form 15G or Form 15H before the end of the year to get tax-free payments.
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