As the government paves way for advancing the Budget presentation and getting the Finance Bill passed before March 31, here is something that you should watch out for.
Tax experts said it will aid better tax and accounts planning.
“Presenting the budget in January will give two months time to individuals and corporate to realigns their plans,” said Girish Vanvari, national head of tax at KPMG.
Though the budget is presented in February, several tax proposals kick-in only from June after Parliament passes the annual finance bill in May.
For instance, service tax was increased to 15% from 14% from June 1 this year, though the finance minister announced the change in the budget presented on February 28.
Income tax changes come into force only after the finance bill is passed, but these are retroactively implemented from April 1.
Parliament passes the budget through a two-stage process. A vote on account is passed in March to meet necessary expenses on employees’ salaries and other costs for two to three months.
The finance bill, which contains tax changes, and the demands and appropriation bill, which spells out full year expenditure details, are passed in May.
In the present scenario, you were also insulated against any tax changes for two months, till June. For instance, all your air travel, mobile services, movies, eating out and luxury cars got costlier from June 2016, which saved your bills for two months.
In Budget 2016-17, the government had increased service tax to be charged at 15% as the krishi kalyan cess of 0.5% came into force from June1. When the budget date is advanced (from the next year), any such an increase proposed will come into force from April 1.
Similarly, a “luxury tax” of 1% cars was imposed on cars priced above Rs 10 lakh and services valued at above Rs 2 lakh.
A hike in the tax had push up retail prices of almost all everyday products, and services such as air travel, restaurant meals, movie tickets, telecom and DTH services and credit card, electricity and mobile bills.
Millions of middle-class families that spend nearly half their monthly budget on services will feel the pinch, as almost all services -- barring a small negative list -- are taxed. This is the third such hike since February 2015.
These levies, particularly a higher service tax rate, could push up inflation rates. India’s retail inflation rose to 5.06% in August, snapping a three-month easing trend.
Budget in January/Early February: What it means for you
• Means more time align personal investments according to proposals in the Budget
• There will 2 months to adjust personal finances according to new tax provisions in the Budget
• Companies will get more time to start provisioning for advance taxes keeping in mind changes in corporate tax structures
• Indirect tax changes will be applicable from April 1; will end uncertainty as some are now applicable from June 1