labels: investment - general, union budget 2006
Personal Tax Report Cardnews
28 February 2006

While the tax rates have remained unchanged, rationalisation of the FBT could have positively impacted the net take-home of the salaried class, particularly those enjoying conveyance allowance and superannuation benefits.

Annual superannuation contributions by employers up to Rs100,000 per employee are now not subject to FBT. Indirectly, this is a respite for employees entitled to such benefits. Last year, FBT was introduced on superannuation contributions with no exemption, which forced companies to evaluate whether they at all wanted to continue with such schemes.

Further, the finance minister has not made any amendments to move towards an EET regime for the present. This is a big respite for individual taxpayers.

Consumer Items
As a consumer, the following became cheaper for you:

  • Edible oil to decrease by 6 per cent
  • Condensed milk to decrease by 10 per cent
  • Mineral water to decrease by 8 per cent
  • Tea to cost Re1 per kg less
  • MP3 players to reduce by 5 per cent
  • Biscuits to decrease by 5 per cent
  • Packed foods to cost 6 per cent less
  • Soft drinks to cost 4 per cent less
  • Small cars to cost 8 per cent less

And the following became expensive:

  • Cigarettes to be 5 per cent more costly
  • Computers to cost 8 per cent more
  • Increase in service tax rate to impact household savings

Investments Long term capital gains on equity shares are still exempt. However STT rates have been increased by 25 per cent. The new STT Rates are as under:

Taxable Securities Transaction

Pre-Budget

Post-Budget

Rate (%)

Payable by

Rate (%)

Payable by

Delivery based trades

0.1000

Both purchaser & seller

0.125

Both purchaser & seller

Day Trades

0.0200

Seller

0.025

Seller

Derivatives

0.0133

Seller

0.017

Seller

Units of an equity oriented mutual fund to the mutual fund

0.2000

Seller

0.250

Seller

Investments in fixed deposits in scheduled banks for a term of five years or more are now eligible for a deduction (up to the overall limit of Rs100,000) under section 80C.

Investments in specified pension funds under section 80CCC are now entitled to deduction up to Rs1,00,000 (against Rs10,000 last year). But the overall cap on total deduction up to Rs100,000 for investments in instruments under section 80C along with section 80CCC has been kept intact.

Tax return filing
The one-by-six scheme has been abolished, which means that persons without a taxable income who were earlier required to file tax returns under the scheme, will not be required to do so now. The government also proposes to introduce the 'Tax Returns Preparers' scheme, which should simplify tax filing for individuals.


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Personal Tax Report Card