- Team Orbis Economics
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Below are details of how the Budget’s tax related announcements can impact you:
Income Tax: In a bid to increase revenue collections, the government has decided to increase the tax liability of the ‘super-rich’ by imposing a surcharge of 10% on individuals and entities whose income exceeds Rs. 1 crore for a period of one year. If you fall under the sole-proprietorship category or partnership firm, this will mean an increase in the amount of tax you need to pay, since the law does not distinguish between the firm and the owners as distinct entities. By the same token if your entity’s income is less than Rs. 5 lakh, you can now avail of a tax credit of Rs. 2,000.
Corporate Tax: If your business income exceeds Rs. 10 crore, there has been an increase in surcharge by 5 percentage points on income to 10%. This will impact after tax earnings negatively, but the good news is that much like the surcharge on income tax, this too is for a period of one year only.
Excise Duty: If you function in the readymade garments sector, there is good news for you, with ‘zero excise duty’ now applicable at specific stages of production. Similarly, if you are in the handmade carpets or producing textile floor coverings of jute and coir, you are exempt from excise duties.
Service Tax: If you are a service tax assesse but have failed to pay taxes in the recent past, you can now do so without fear of penalty or interest payments. The “Voluntary Compliance Encouragement Scheme” announced in the budget allows you to make a payment since 2007 in one or two instalments at prescribed dates. On another note, if you run an air conditioned restaurant that could avail of service tax exemption if you did not serve alcohol, the distinction no longer applies and the tax is chargeable to you now as well.
Customs Duties: Even though overall export duties have remained unchanged, sectors that have been hit on account of the global recession, have been provided a fillip in the budget. For instance, excise duty on leather goods has been decreased from 7.5% to 5% and duty on pre-forms of gem stones has been decreased from 10% to 2%.
Goods and Services tax: While the budget announcements on GST do not impact immediately, it does prepare ground for a GST law. In fact, it has also set aside a corpus to compensate states for loss in tax revenues once a new GST law comes into effect.