New Delhi, May 31: From June 1, a couple of changes brought in the taxation mechanism by Finance Minister Arun Jaitley through the Union Budget 2016-17 will be applicable. Most prominently, the below listed four tax decisions will have an impact on middle class Indians, particularly the ones residing in urban part of the nation, and working as a professional employees. Here are the 4 changes , which would bring joy as well as concern to the aam aadmi:
1. Service Tax: The most adverse impact of alteration of tax mechanism would be felt through the increase of service tax. On all taxable components under this category, an additional krishi kalyan cess of 0.5 per cent would be applied, for agricultural development. Thus, the total service tax charged would be a massive 15 per cent. The impact of this tax hike would be felt by people while dining in restaurants, browsing on internet and travelling from one place to another. This is the third consecutive hike of service tax. For the first time, it was hiked during the 2015-16 budget, when Jaitley increased it from existing 12.5 to 14 per cent. In November, a Swachh Bharat cess was added, which increased the tax rate from 14 to 14.5 per cent. This was followed by an additional cess of krishi kalyan in 2016-17 budget.
2. Tax relief on Gold Purchase: Although, the government decided to charge 1 per cent additional tax on purchase of gold more than Rs 2 lakh, it rolled back the decision and increased the threshold to Rs 5 lakh. This increase in exemption limit would benefit middle-class families, who need to purchase jewellery for marriages. (ALSO READ: No capital gains tax on redemption of gold bonds)
3. Tax on medium to high-end cars: Purchasing cars above Rs 10 lakh would charge the buyers an additional 1 per cent tax. This tax would be collected by the retail seller, and would be calculated on ex-showroom price.
4. No TDS for Provident Fund withdrawals: On facing massive backlash from labour unions for its decision to deduct tax on PF withdrawal, Narendra Modi government succumbed to public pressure, and rolled back the contentious proposal. Finance Minister Arun Jaitley increased the threshold to Rs 50,000 from Rs 30,000. Those seeking to withdraw amount from their EPF corpus, they would not to be charged with Tax Deduction at Source (TDS).