10 financial planning tips for new tax norms announced in Budget 2016

Taxpayers have to work for new and extensive tax planning after budget 2016. They have to pay tax on Employees Provident Fund (EPF) withdrawal and dividend. But this budget has major relief to home buyers. Here is the fine print of income tax proposals:

1. Think before opting for an EPF
If you got a new job, then think twice when you are opting an employee provident fund or EPF. From April 1, 2016, when you withdraw the EPF, you have to pay tax on 60% portion of amount. Rest 40% will be tax free. Anyway, you have no way out because EPF is compulsory. Similarly, new pension scheme or NPS will also taxed just like EPF.

2. Your builder has delayed…don't worry for tax exemption
Currently, most of the home buyers make payment to the builder but do not get possession within stipulated three years' period. Since the buyer does not get possession within three years, he is entitled to get only Rs 30,000 tax deduction. Now, finance minister has raised this time limit up to five years.

Government has realised that more than 80% housing projects are delayed and most of the buyer has not been able to avail tax exemption on home loan interest. Budget 2016 has raise the time limit from three tears to five years.

Earlier when a home buyer is borrowing money to buy home, he has been allowed tax deduction on interest portion of loan up to two lakh on possession within the stipulated three years period. Now buyer would avail tax exemption on interest portion for a extended time limit of five years. This popular tax deduction was allowed only if these three condition are satisfied: first, money must have been borrowed on or after April 1999.Second, it should be borrowed for purchase or construction of a house, and third, home buyer should acquire or get possession within three years of borrowed money.

3. New home buyer get extra tax benefit
If you borrow up to Rs 35 lakh from bank to buy residential property of value below Rs 50 lakh, you will get fifty thousand extra tax exemption on interest portion of loan. However, the loan has to be sanctioned in 2016-17 only. This exemption benefit would be additional to the existing exemption of two lakh in a year.

4. Now agreement date will be considered for tax
Budget 2016 proposed that tax will be levied only on the property price on the agreement date not on the date of registry. Usually when you sell the house property the buyer gives some advance but not registered that property immediately. Buyer say that he will registered later on. He may take time to arrange money to pay for the property.

Currently under income tax section of 50 C, stamp duty price recognises the date of transfer not date of agreement. Suppose, if stamp duty has increased between the duration of the agreement and registry then buyer and seller both have to pay the tax on extra amount. For instance, for an agreement of Rs two crore and a stamp duty of Rs 2.10 crore, then taxable price will be Rs 2.10 crore. But if registry will take place after six months and by that time if stamp duty price has increased from Rs 2.20 crore to Rs 2.50 crore, then seller and buyer will pay the tax on Rs 2.50 crore.

5. More options for long-term capital gain
Budget has indicated that government will open new option for long term capital gain. If you sell a house after there years, it is considerd as long term capital gain. This gain must be invested in either residential house or capital gain account. There is very limited option. Now, government will notify certain funds, where seller can invest long term capital gain in to these funds. But he can only invest up to Rs 50 lakh.

6. No need to maintain books of account if you are professional
If you are professional like doctor, advocate or engineer, currently you have to maintain books of accounts and follow the auditing procedures.

Now, government has come out with a presumptive scheme with rider of Rs 50 lakh. Under the new scheme, professionals have to pay 50 per cent tax on his gross income receipt.

It means 50 per cent would be treated as expenditure and rest 50 per cent would be as their income. Hence, now no need to maintain books of accounts and audit procedure.

7. No tax on legal heir of pensioners
Currently, under new pension scheme when you get the payment whether in instalment or lump sum it is taxable. Now, government said in this budget if the pension is received by a legal heir, then, it would not be taxable.

8. HNI dividend will be taxable now…
If you are individual or Hindu Undivided Family (HUF) and your dividend income exceeds Rs 10 lakh a year, then you have to pay 10 per cent tax on that income.

9. Now, belated return can be rectified
Presently one cannot rectify belated income tax return. In this budget, there is a big relief for tax payers who want to rectify their returns after due date of submission.

10. Return file became mandatory

In Budget 2016, even your income before claiming any exemption of long-term capital gain exceeds Rs 2.50 lakh you will have to file income tax returns.
You have to file income tax return if your income exceeds 2.5 lakh. Suppose your income is Rs 3 lakh and you have invested Rs one lakh in provident fund, even though, your income become Rs 2 lakh, you have to file the returns. But earlier if you availed long-term capital gains from share market there was no need to file income tax returns because long-term income was exempted.