Look beyond tax slabs, there's more for your money
Every year, just ahead of the Union Budget, all eyes shift to the finance minister in the hope that he will provide them something extra, either by increasing the tax exemption limits, relaxing the tax brackets or by way of increasing the deductions that can be claimed.
While finance minister P Chidambaram chose not to make any major changes in the tax brackets, except a tax credit of Rs 2,000 offered to individuals with a total income of up to Rs 5 lakh, he brought about changes in the tax treatment of dividend income on debt products for retail investors, along with the introduction of the inflation-indexed bonds that may prompt investors to revise their financial plan a bit.
Changes in the tax rate on dividend income of debt products
With effect from June 2013, individuals and HUF (Hindu undivided families) will be required to pay 25 per cent on their dividend income from all non-equity funds, which currently stands at 12.5 per cent. “In order to provide uniform taxation for all types of funds, other than equity-oriented fund, it is proposed to increase the rate of tax on distributed income from 12.5 per cent to 25 per cent in all cases where distribution is made to an individual or a HUF,” according to the memorandum to the Finance Bill, 2013.
The same for investors other than retail and HUF stands at 30 per cent. According to market players, this will lead to investors opting for growth option rather than the dividend distribution
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