Following are the changes proposed with regards to the Income tax -
1. Surcharge on tax on taxable income above Rs. 1 Cr has been increased from 12% to 15% which will affect only the people whose income is above 1 Cr
2. Dividend tax - Earlier the dividend was not taxable in the hands of recepients. But as per the proposals in union budget 2016-17, any dividend in excess of rs. 10 lac will attract a tax of 10%
3. While the basic exemption limit continues to be Rs. 2.5 lacs, tax rebate of Rs. 2000 available to small tax payers under section 87A has been increased from 2000 to 5000.
4. Tax on retirement savings - Until now the PF, EPF was exempt from any taxation at all stages of investment. But as per the new proposals 60% of all contributions made after 1st April, 2016 will attract a tax at the time of withdrawl. Govt is going to come out with certain clarifications on this proposal very soon.
5. Additional deduction of interest on Housing loan for first time home buyers- Deduction for rs. 50'000/- per annum additional interest for loans up to 35 lacs sanctioned in 2016-17 for the first time home buyers where house cost doesn't exceed 50 lacs. Overall first homebuyer can get max. interest deduction of rs. 2.50 lac.
6. 80 GG deduction limit goes up from 24'000 to 60'000 per annum - This applies to those who are not granted any HRA in their salary. Earlier the rule was that Rs. 2000/- per month or 25% of total income (whichever is less) was deductible from taxable income, which has now been revised to Rs. 5000/- per month.