Finance Minister Pranab Mukherjee in his Budget for 2012-13 had given some relief to tax payers by proposing to raise the income tax exemption limit for individuals to Rs 2 lakh per annum from Rs 1.80 lakh and readjusting the slabs that attract higher tax rates.
Under the new proposal, persons with income up to Rs 10 lakh per annum will save about Rs 1,030 and those earning more than Rs 10 lakh will see their tax liability coming down by up to Rs 20,599.
Although the Finance Bill 2012 is yet to be approved by Parliament, it is unlikely that Mukherjee will make any major changes in his proposals with regard to direct taxes which entail a sacrifice of Rs 4,500 crore on the part of exchequer.
On the other hand, his proposal of hiking service tax from 10 per cent to 12 per cent, which comes into effect from today, will make telephone calls, beauty parlour visits, eating out in restaurants, insurance and travel by air and air-conditioned rail coaches expensive. The effective rate of service tax would now be 12.36 per cent, up from 10.30 per cent.
Mukherjee proposed to collect an additional Rs 18,660 crore during 2012-13 by hiking service tax rate. Currently about 120 services including advertisement, dry cleaning, health clubs, credit card etc attract service tax.
In order to expand the base of service tax, the Minister also proposed a negative list, a notification regarding which, however, would be issued later.
Under the negative list proposal, the service tax will be levied on all services expect those mentioned in the list. At present, the tax is levied on the basis of a positive list, meaning that it applies only to specified service.
The government proposes to collect about Rs 1.24 lakh crore from service tax during the current financial year, up from Rs 95,000 crore during 2011-12.
The services sector accounts for about 59 per cent of the country's Gross Domestic Product (GDP). There will, however, be some relief for senior citizens (above 60 years) who will be relieved of the burden of paying advance taxes from this fiscal.
In order to reduce compliance burden of elderly persons, Mukherjee had proposed that “senior citizens, not having any income chargeable under the head ‘Profits and gains of business or profession' shall not be liable to pay advance tax and such senior citizen shall be allowed to discharge his tax liability (other than TDS) by payment of self assessment tax.” Individual assesses under the Income Tax Act are required to pay advance tax in three installments on September 15, December 15 and March 15 every year.
On the other hand, taxpayers, who hold foreign bank accounts or properties, however, will have to furnish details of their foreign assets, which include information like country name, address of the bank, name mentioned in the account and peak balance during the year, after converting the value of the foreign currency in Indian rupee.
The government has already modified by the Income Tax Return (ITR) forms by introducing a new column about details of foreign assets. The taxpayers will have to furnish the details in their returns for assessment year 2012-13.