Income Tax Slabs for Financial Year 2012-13

Here’s the Income Tax Slabs for the financial year 2012-13, based on the budget presented by the Finance Minister on 16th March 2012.

General
Till 2,00,000 – 0%
2,00,001 ~ 5,00,000 – 10%
5,00,001 ~ 10,00,000 – 20%
Above 10,00,000 – 30%

Senior Citizen (Between 60 & 80 years)
Till 2,50,000 – 0%
2,50,001 ~ 5,00,000 – 10%
5,00,001 ~ 10,00,000 – 20%
Above 10,00,000 – 30%

Very Senior Citizen (Above 80 years)
Till 5,00,000 – 0%
5,00,001 ~ 10,00,000 – 20%
Above 10,00,000 – 30%

Comments
The Finance Minister didn’t mention about a separate tax slab for women. Either it is awaited or we will see that it is unified with the General category. I think the unification of tax slabs for men and women makes greater sense.

The first slab is raised from 1,80,000 to 2,00,000 leading to a maximum tax savings of 2,000 in this slab. People earning income between 8,00,000 and 10,00,000 are the biggest beneficiaries of the new tax slabs as this range of income moves from a 30% slab to 20% slab, resulting in a maximum tax savings of 20,000.

Overall, this is not a great relaxation for the income earning populace at a time when the cost of living has consistently been higher and is not showing any signs of cooling.

Related Articles
- India moving closer to adopt GST
- New Income Tax Slabs
- How does Short Term Capital Gain/Loss work?
- No proof required for LTA & Conveyance allowance claims
- How to file Income Tax returns online
- How to check whether your employer/financial institution have deposited your TDS?

India moving closer to adopt GST

The 13th Finance Commission (TFC) has endorsed its proposal for single goods and services tax (GST) and recommended a “revenue-neutral” rate of 12% – Livemint.

Of the 12%, 5% will go to the center and 7% to the states. From the state’s share, 2% will go to third tier of governments made up of panchayats and local bodies.

Currently different states charge different tax rates for the same goods and services and there’s an incentive for an individual to purchase goods from a state where tax rates are lower. The difference in tax rates sometimes lead to the smuggling of goods as well.

Once adopted, GST will enable uniform tax rates for similar goods and services across the country. It would economically unify the country, reduce the incidence of tax and ensure greater revenue through better compliance. Most of developed countries of the world use GST.

The union government had promised to adopt GST by 1st April 2010, but has been unable to get the states to agree to the schedule. Some states fear that they would lose their existing tax revenues if they adopt GST.

To take care of this apprehension, the commission recommends creating a ‘safety net’ (a compensation fund with a corpus of Rs. 30,000 crore) in five years by the center. Any state which suffers a revenue loss from implementing GST shall be compensated using the safety net.

Related Articles
- New Income Tax Slabs
- How does Short Term Capital Gain/Loss work?
- No proof required for LTA & Conveyance allowance claims
- How to file Income Tax returns online
- How to check whether your employer/financial institution have deposited your TDS?

New Income Tax Slabs

In the union budget for financial year 2009-10, the Finance Minister has announced new tax slabs.

General
Till 1,60,000 – 0%
1,60,001 – 3,00,000 – 10%
3,00,001 – 5,00,000 – 20%
Above 5,00,000 – 30%

Women
Till 1,90,000 – 0%
1,90,000 – 3,00,000 – 10%
Remaining tax rates are same as general

Senior Citizen
Till 2,40,000 – 0%
2,40,001 – 3,00,000 – 10%
Remaining tax rates are same as general

As you can see, compared to the last change, there is a 10,000 rupees increase in the first slab across all categories, while the remaining slabs remain unchanged. This would lead to a maximum savings of 1000 rupees for a tax payer whose income falls above Rs. 1,60,000. This may not be a significant saving for many.

However the interesting thing to note is that there is no 10% surcharge for incomes above 10 lakhs. This is a welcome move because I feel progressive taxation is counter productive to an aspiring population. Eventhough these tax sops would make holes in government's revenues, I guess the government is looking to increase the expendable surplus of the populace so as to boost up the economic downturn.

How does Short Term Capital Gain/Loss work?

I found this interesting snippet circulated through email by ICICIDirect, which describes in simple anecdotes how Short Term Capital Gain/Loss works in India. I am posting it straight away, without any modifications.

1. Mr. Sharma purchased some securities on May 7, 2008 at a total cost of Rs. 100,000. On July 3, 2008, he sold these securities for Rs. 130,000. Here the Short Term Capital Gain, STCG (gain arising from sale of securities which is less than 12 months old) was Rs. 30,000 (a) and STCG tax (15% as per current laws) for this gain calculated to Rs. 4,500.

2. But Mr. Sharma had also purchased securities worth Rs. 90,000 on June 12, 2008 and had sold them at Rs. 40,000 on February 10, 2009. Hence there is a Short Term Capital Loss (loss arising from sale of securities which is less than 12 months old) and equal to Rs. 50,000 (b).

3. Now as per the tax laws, Mr. Sharma’s Short Term Capital Gain (a) is offset by Short Term Capital Loss (b). Hence there is no Short Term Capital Gains tax payable by Mr. Sharma for the financial year 2008-09. Also, he carried forward Rs. 20,000 loss for offsetting any Short Term Capital Gains he makes in the next 8 years.

Thus a person needs to pay STCG tax only for the difference between Short Term Capital Gain and Short Term Capital Loss if the difference is positive; no tax if the difference is zero or negative. Moreover, if the difference is negative, he can even carry forward and offset the loss to gains in the next 8 years, until the loss is completely used off to offset those gains.

Thanks to ICICIDirect.com

Government cuts excise duty and service tax

The Government of India has reduced excise duty and service tax by 2 percent in its Interim Budget. The general excise duty has been reduced from 10 percent to 8 percent while service tax has been slashed from 12 percent to 10 percent.

The service tax cut will have a profound impact, both on people as well as on government, as it is levied on almost all services that we exercise in our day today lives, right from eating out in a restaurant, to watching a movie, to the charges on services given by various institutions such as banks, etc. For the government, the implications will be of Rs. 28000 crore.

"The measures will lead to revenue loss of Rs 13,000 crore in service tax, Rs 8,500 crore in excise duty and Rs 6,600 crore in customs duty" says Central Board of Excise and Customs Chairman P C Jha.

Even though tax cuts are inevitable in a recession hit economy, I wonder how much we can have of these as the government’s revenues are taking huge blows while giving away these. With the UPA government in the brink of completing its term, the next government is definitely going to bear the brunt of these.

The cut will be effective from midnight of Tuesday, 24th February 2009.

Tax

The Internal Revenue Service (IRS), which is the tax collecting authority in the United States, demands that 30 percent of the winning amount on casinos and other gambling establishments by international visitors shall be withheld by these establishments. This amount will have to be submitted as tax to the government.

But residents of certain countries outside the US are eligible to get a refund of tax on such casino winnings as a result of a few tax treaties that have been made with these countries by the US government. Casino tax rebate is an agency who is experienced in this.

They can help an international visitor on US tax recovery and provide assistance for getting a refund from the federal gambling winnings tax withheld by the particular establishment. I guess this would be a service particularly greatly useful for those international visitors planning spend some time in the US casinos.

Legal help for taxation issues

Generally, people tend to see taxation as a meager formality and presume that it is something that is mostly unnoticed by the tax authorities. Due to this, sometimes they end up defaulting on filing tax returns and not taking seriously those initial legal notices from the tax authorities, especially in cases where they are outside the country for a long period for some assignments abroad or for various other reasons. But when the taxmen knock at the doors for a tax returns default, or when a directive comes from the court to appear before a judge, more often than not, they run in to panic.

Thus, taxation, with its intricacies and umpteen formalities, may sometimes turn out of control and result in a life fearful of the tax department (Internal Revenue Service, IRS, in the United States) and the legal proceedings that might follow after that. That is when the professional help from a tax help attorney comes to the rescue of the people who face the legal proceedings. With their proven expertise in the field of taxation and also in dealing with similar cases for a long period of time, they can assist a person to overcome the dilemma of being under the IRS scanner.

Tax Solutions offered by the tax help attorney may vary depending up on the exact situation a person is in. Some issues would be associated with the non-filing of tax returns where as other issues may vary from unpaid payroll taxes, wage or bank levy, audits, asset seizure etc. They maintain a huge collection informational taxation related articles and also have a blog on tax laws through which one gets to read the latest on the area of taxation. Thus, tax help attorney would be able to offer a major helping hand for people in distress due to tax legalities.

No proof required for LTA & Conveyance allowance claims

In a landmark ruling, the Supreme Court has said that employers are not under any statutory obligation to collect supporting evidence and furnish it to tax authorities while assessing Conveyance and Leave Travel Allowance (LTA) of their employees. Currently, claims without supporting bills are taxed.

The verdict came as a result of a plea from companies including L&T and ITI.

Quoting Times of India,

In its defense, the revenue department had argued that assessee companies were under statutory obligation under Income Tax Act, 1961, and relevant rules, to collect documentary proof to show that their employee(s) had actually utilized the amount paid towards the leave travel concession and conveyance allowance.

Rejecting the plea, the court in its order said: “The beneficiary of exemption under Section 10(5) (of the Income Tax Act) is an individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee(s).”

So, until the tax authorities come up with a circular/amendment to clear this out (which I guess they might), claim all your LTA and Conveyance allowances without showing any bills.

More details here.

On filing Tax Returns

Livemint has this great article written by Sunil Dhawan on filing tax returns. It’s worth a read.

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- How to file Income Tax returns online
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How to file Income Tax returns online

Income Tax Department of India facilitates a tax payer to file his Income Tax returns online through their website. It is an easy process and following are the steps involved according to IT department website,

1. Select appropriate type of Return Form from the website (ITR-1/ITR-2/ITR-3/ITR-4)

2. Download and install Return Preparation Software for the selected Return Form

3. Fill return offline and generate XML file

4. Register and create a user id (PAN) and password at the website

5. Login and click on relevant form on left panel and select "Submit Return"

6. Browse to select XML file and click on "Upload" button

7. On successful upload acknowledgement details would be displayed. Click on "Print" to generate printout of acknowledgement/ITR-V Form

8. Incase the return is digitally signed; on generation of "Acknowledgement" the Return Filing process gets completed. You may take a printout of the Acknowledgement for your record

9. Incase the return is not digitally signed, on successful uploading of e-Return, the ITR-V Form would be generated which needs to be printed by the tax payers. This is an acknowledgement cum verification form. The tax payer has to fill-up the verification part and verify the same. A duly verified ITR-V form should be submitted with the local Income Tax Office within 15 days of filing electronically. This completes the Return filing process for non-digitally signed Returns

Here is the link to IT Department's eFiling website.

Related Articles
- How to check whether your employer/financial institution have deposited your TDS?

How to check whether your employer/financial institution have deposited your TDS?

Most of the new age companies deduct income tax before giving salary to the employees (Tax Deduction at Source or TDS). TDS is also done by banks and other financial institutions for returns on fixed deposits, short term gains on equities etc. How do you check whether the tax deducted from you through TDS have been paid to the exchequer by your company or the financial institution?

Tax Information Network (TIN) of Income Tax department, Government of India facilitates a PAN holder to view annual tax statement (Form 26AS) online.

It’s very straight forward involving few simple steps
1. You have to register your PAN number online
2. Get it verified by TIN
3. Start checking tax credit online

The verification can be done by either going to the nearest TIN-Facilitation Centre or asking them to visit your address. There is a small fee for the one time authorization. Rs 15 + service tax if the PAN holder visits the TIN-Facilitation Centre in person or Rs. 100 + service tax if the PAN holder opts for the TIN employee to visit him and do the verification.

This is the link to do it.

Petrol price vis-à-vis diesel and kerosene prices

The price of crude oil has touched $132 a barrel. As 1 barrel is 159 litres, assuming a rupee/dollar exchange rate of 42, cost of crude oil (or petrol) per litre should have been around 35 rupees (plus manufacturing and transportation costs, profit). But petrol is sold at Rs. 56 per litre!

The main reasons for such a difference are two.
1. Import duties/sales tax on crude oil/petrol by central and state governments
2. Petrol price is increased disproportionately for the cross subsidization of kerosene and diesel as the later two are common man’s fuels

Kerosene is used by millions of poor in India and a rise in kerosene price would affect them severely. Diesel is used in trucks and trains which do mass transportation of essential commodities. Since a huge hike in these two would affect the concerned and the common populace very badly, government usually refrains from increasing their prices, or if increased, less compared to that of petrol.

But there are few things that need to be considered. One, kerosene is widely used for adulterating petrol as there is a price difference between them. Two, most of the (luxury)cars nowadays have diesel variants to exploit the price difference meant for a different cause. But then the sheer number of Indian common man may justify government’s decision to continue subsidizing kerosene and diesel.

PS:
Did you know that petrol sells at Rs. 113.30 a litre in Turkey, while it is just Rs. 2.12 a litre in Venezuela?

After the recent surge in global oil prices, and a subsequent increase of petrol/diesel prices in India, Rediff has compiled this great article about world’s costliest and cheapest petrol.

Effects of Oil price hike

The government has hiked petrol price by Rs. 5, diesel price by Rs. 3 and gas cylinder (14.2 Kg) price by Rs. 50 on the wake of global crude oil price increase while the price of kerosene remains unchanged. The move is also accompanied by several reductions in customs and excise duties related to oil.

Though the rise in oil prices will be a relief for oil marketing companies like BPCL, HPCL etc, their losses will not covered completely by the rise. All the measures (price hikes and duty cuts) will reduce their loss by Rs. 21,000 Crore (1 Crore = 10 Million)after a cost of Rs. 22,600 Crore to the government due to the reduction in income from duties. Still, there will be a gap of Rs. 29,000 Crore, which indicates that the rise is not enough and there could be another oil price increase in future.

The rise in oil prices will definitely add salt to the wounds already created by inflation surge. Since oil prices are directly or indirectly linked to food and other commodities used by the common populace, inflation is most likely to increase in the days to come. Strong correlation that the oil has with inflation!

So, will it lead to a decrease in the usage of petrol? Quite possible, as people who own vehicles would try not to use it more and would prefer alternative methods like car pooling, public transport etc. There is also a chance that the cost of public transport (transport buses, cabs, ricks etc.) may increase.

In all possibility, I feel, the middle and upper classes will manage to escape from the pinch, but it’s the lower class that is going to suffer, as usual!!

Outsourcing of transaction tax compliance

Over the years companies have found outsourcing of important business processes such as recruitment, payroll, finance, training, HR etc. as a strategic and effective alternative that saves time, money and resources. Outsourcing of taxation related processes in companies to third party vendors is the next big thing happening in the outsourcing arena.

Transaction tax compliance is a burdensome process for companies. To give you an example, in the United States alone, there are more than 13,000 tax jurisdictions and each year the tax laws change more than 1,000 times. This makes it extremely difficult for companies to track tax rates and manage tax payments to the government for various transactions done at various jursidictions having different tax laws. Thus, while making sales in a particular geography, a company (that is operating over multiple geographies) should know about the prevailing sales tax, use tax and tax laws of that geography so as to account it in the tax amount to be paid to the government.

Failing this (or variations happening in tax payments due to not accurately tracking sales tax and use tax rates), companies have to face penalties, audits and other legalities from the tax authorities. This shows how important it is to ensure transaction tax compliance by a company, eventhough the process is unwieldy. That's where taxation compliance outsourcing becomes important.

A good example of a firm that do outsourced transaction tax compliance is Sabrix, with it's Managed Tax Service (MTS) that offers tax compliance solutions to small business and mid-market companies (they also have a demo of the application at http://www.sabrix.com/smb/demo/).

Outsourcing tax compliance to firms like Sabrix has lot of advantages. It would eliminate the hassles (tracking tax rates of various geographies etc.) associated with tax compliance. The payments to tax authorities will be accurate and timely due to the expertise of the firm as it is dealing only with such things (core competency). Above all, there is a cost advantage to it. As a result companies can concentrate more on its core business. Few more reasons to outsource transaction tax compliance can be found here.

New Tax Slabs

In the union budget for financial year 2008-09, the Finance Minister has announced the new tax slabs.

General
Till 1,50,000 – 0%
1,50,000 – 3,00,000 – 10%
3,00,000 – 5,00,000 – 20%
Above 5,00,000 – 30%

Women
Till 1,80,000 – 0%
1,80,000 – 3,00,000 – 10%
Remaining tax rates are same as general

Senior Citizen
Till 2,25,000 – 0%
2,25,000 – 3,00,000 – 10%
Remaining tax rates are same as general

This would be a welcome relief to crores of tax payers in the country who are caught under inflation woes.