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Monday, March 4, 2013
Budget 2013: 5 Points In The Fine Print :
There are many details that the finance minister did
not mention in his budget speech but it will affect an individual either
directly or through their business dealings. Here is a look at several
of these areas to see the real impact of the proposals because ignoring
these could prove to be a major mistake if the actual benefit is denied
by the taxman.
No tax free insurance receipt
A key man insurance policy covers the life of a key
person in the business. The current rules state that if it is assigned
to the key man before its maturity then it becomes like a normal
insurance policy. A change has been proposed to ensure that even if such
a policy is assigned it would remain a key man policy and the amount
received as a payout would be taxable as income.
No installation of plant and machinery in office
There is an additional investment allowance proposed
for new plant and machinery to be installed by an entity. A restriction
of this benefit would arise if the plant or machinery was used either
within India or outside by some other person. More importantly, if the
plant and machinery is installed in any office premises or any
residential accommodation, then this would not qualify for the benefit.
Property given below stamp duty value
Any immovable property changing hands without any
monetary consideration would give rise to a situation where the value of
the property in excess of Rs 50,000 is taxed in the hands of the
receiver. Under a new proposal if there is some amount paid for such
transfer of immovable property and this amount is less than the stamp
duty value by Rs 50,000 or more than this would give rise to income for
the person getting the property.
Tax credit actually less than Rs 2000 for some people
For all those earning between Rs 2 lakh and Rs 2.2
lakh the tax credit will be only upto the tax to be paid which will be
less than Rs 2,000. It is only for those people who earn between Rs 2.2
lakh and Rs 5 lakh that the tax credit works out Rs 2,000 and this
restriction will mean that several people actually end up with a lower
Housing loan to be from a financial institution
Getting the tax benefit for the first time home owner
could end up requiring specific steps because individuals have to be
careful in ensuring that the loan is taken only from a financial
institution and not any other entity. The term financial institution has
not been defined yet and this is important otherwise the benefit would
not be allowed.