SMART BOND FOR EXEMPTION!

Enjoy exemption from long term capital gains by planning investment in specified bonds!

               Section 54EC of the Income-tax Act provides for exemption of taxable long term capital gains (LTCG) arising from the transfer of an asset, to the extent the amount of such gains are invested in notified bonds within a period of six months from the date of transfer.  Notified for this purpose are the three year bonds issued by National Highways Authority of India (NHAI) and Rural Electrification Corporation (REC).

               Until FY 2006-07, there was no monetary ceiling prescribed in regard to investment in such capital gains bonds and hence a taxpayer could virtually invest his entire taxable gain, even running into crores of rupees, in these bonds and avail the benefit of 100% exemption under Section 54EC.

               However, the Finance Act, 2007 amended Section 54EC so as to provide that this exemption would be available subject to the condition that the investment in the notified capital gains bonds made on or after 1st day of April, 2007 does not exceed Rs.50,00,000 during any financial year. (more…)

KBC – NO FREEDOM FROM TAX!

All winnings from Lottery or Games are taxed at flat rate of 30% & TDS is mandatory before Prize is handed over!

Though the popular TV Game Show KBC (Kaun Banega Crorepati) will launch its 5^th Avataar on India’s 64^th Independence Day 15^th August, 2011, it will indeed be ironical that its prize winnings will enjoy ‘no freedom from tax.’ 

Participants receiving cheques signed by Big B for the full prize money as shown on your TV screen is mere hype, since no one really gets to take anything home before the taxman gets his pound of flesh (read tax) at a flat 30.9% from the same! (more…)

Now no Capital Gain without Tax Pain!

End Of Tax Honeymoon For Market Investors!

Understanding The New Capital Gains Regime

New Rules for Computation

• Present distinction between long term and short term gains to be eliminated.
• Current exemption for capital gains arising from transfer of personal effects and agricultural land beyond specified urban limits to continue.
• Base date for computing cost of acquisition shifted from 1^st April, 1981 to  1^st April, 2000. 
• Indexation benefits can be availed for all assets held for atleast one year.  

No More Tax Concessions

•  Zero tax on STT paid long term capital market gains and 15% concessional rate for short term market gains to end on 31^st March, 2011. 
• No more concessional rates of 10%/20% for taxing specified long term gains. 
• All capital gains to be taxed at the taxpayer’s applicable marginal rate. Securities Transaction Tax (STT) to be simultaneously eliminated.

 Exemptions Abolished & Redesigned

• Present exemption u/s. 54EC via investment in specified bonds abolished. 
• Current exemptions u/s. 54, 54B and 54F attempted to be redesigned under a new scheme of relief for roll over on the basis of a given formula.  (more…)

Minus Social Security : EET=Inequity

Hard Hit Small Salaried Deserve Lower Starting Tax Rates!

Both Employment & Retirement Made More Taxing!

• Allowances & Perks – no longer exempt: House rent allowance (HRA), leave travel concession (LTC), medical reimbursement, value of free or concessional medical treatment and children’s education & hostel allowance.

• Puny deductions that will still continue: Professional tax paid, transport allowance to the extent prescribed and prescribed special allowances to meet expenses incurred for official duties.
  
• Retirement may not be as relaxing: Leave encashment on retirement, to be fully taxable.
• VRS compensation, death or retirement gratuity and commutation of pension to be exempt, only if deposited in a Retirement Benefit Account (RBA).
• However, any amount drawn from RBA (including PF contributions and accretions after 1^st April, 2011) under any circumstances to be treated as taxable in the year withdrawal. (more…)

Tax Bombshell hangs on Insurance!

Code Has Not Visualized Many Dreadful Consequences!

Many Insurance Products under Severe Tax Threat

• Any sum received under a life insurance policy including any bonus thereon will be exempt, only if the premium does not exceed 5% of the capital sum assured and such sum is received only upon completion of the original period of contract or upon the death of the insured.
• All existing ULIPs, Money Back & Guaranteed Return Plans of Insurance Companies, including surrender values of insurance drawn before maturity to take the tax hit.
• Even the return of premium payments out of the investor’s own tax-paid capital, would again attract tax in all such cases. (more…)