Win Some, Lose Some

Here are a few of the finance minister's proposals in Budget 2006 that could impact your finances

The finance minister's proposal to grant tax benefits on investments in long-term fixed deposits in banks, pension schemes and close-ended equity-oriented mutual funds is likely to be a hit with investors. But his decision to withdraw the tax benefits on certain other investment avenues will pinch definitely. India Today spoke to tax experts and dug into the Budget documents to mine out the following irritants and appeasers.

If you have income from overseas, the tax you pay on it abroad shall be reduced from the tax payable in India. This will save more tax than deducting the foreign tax from income for calculating tax payable here.

Gainers: Consultants, writers and others who cater to overseas clients.

Comes into effect on: June 1, 2006

If you make your long-term capital gains from assets such as property tax-free by investing them in bonds, your options are set to get limited. While bonds issued by National Highways Authority of India and Rural Electrification Corporation continue to carry the tax exemption, those issued by National Bank for Agriculture and Rural Development, Small Industries Development Bank of India and National Housing Bank will no longer enjoy it.

Losers: High networth investors.

Comes into effect on: April 1, 2006

If you do not quote permanent account number (pan) when required, expect the tax department to dispatch one. The fm has proposed suo motu issual of pans by the income tax (I-T) department. But this could lead to individuals receiving multiple pans which attracts a penalty of Rs 10,000 under the I-T law.

Comes into effect on: June 1, 2006

If you file returns under the one-by-six scheme but don't have taxable income, you need not file it any more. Filing this return was mandatory even for those who earn less than the minimum taxable income.

Gainers: Individuals owning cell phones or club memberships, but without any income.

Comes into effect on: April 1, 2006

If you are an investor in bank fixed deposits (FD) with maturity of over five years, you can deduct investments up to Rs 1 lakh from your income for calculating the payable tax. Returns from these investments which are to be clubbed with the other 80 C options remain taxable.

Gainers: Few bank FD investors opt for schemes with less than one-year maturities.

Comes into effect on: April 1, 2007

If you are an investor in close-ended equity-oriented mutual funds (MFs), the dividend will become tax-free in your hands.

Gainers: MF investors.

Comes into effect on: June 1, 2006

If you are an investor in an MF which has less than 65 per cent of its corpus in equities, your long-term capital gains will be taxed unless the share allocation is increased.

Losers: Investors in dynamic, balanced and other funds that invest 51 per cent of their corpuses in equities.

Comes into effect on: June 1, 2006

If your employer passes on to you the burden of the fringe benefit tax (FBT), his contribution to your superannuation fund is likely to become tax-free. Exemption from FBT has been proposed for annual contribution of up to Rs 1 lakh per employee. Contributions over Rs 1 lakh will continue to attract the tax. Travel from home to office will also no longer attract FBT.

Gainers: Most employees

Comes into effect on: April 1, 2007

If you are an investor in pension fund schemes, tax benefits can be claimed on investments of up to Rs 1 lakh, instead of the existing Rs 10,000. These schemes are to be clubbed with Section 80C investment avenues, which get deduction of investments of up to Rs 1 lakh from the income on which tax is calculated.

Gainers: Investors

Comes into effect on: April 1, 2007

If you are an investor in an MF, your fund manager may get to pick up global stocks such as Apple, Microsoft and Google. The amount MFs are allowed to invest in stocks listed overseas is all set to be doubled and the restrictions on the type of stocks that can be picked could go. MFs have also been allowed to invest in overseas exchange traded funds.

Gainers: MF investors.

Comes into effect from: To be announced.

If your tax returns are reassessed, gear up to face the queries of i-t officers. They are sure to rush up to extract the disputed tax dues before the end of a fiscal year. The fm has proposed to decrease the time available for completing investigations of defective income and wealth tax returns from 24 to 21 months.

Losers: Tax payers whose tax returns are under investigation

Comes into effect on: June 1, 2006

-By Puja Mehra

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