Tax Changes That Will Come Into Effect From June 2015
May, 28th 2015
There are certain tax changes that will come into effect from next month, in accordance with announcements made by Finance Minister Arun Jaitley in his Budget speech for 2015-16. Here's your cheat-sheet to the changes effective from June 1, 2015.
1. TDS on interest income from Recurring Deposits
The interest income earned on Recurring Deposits shall now be subject to TDS @ 10 per cent. Recurring Deposits are type of Fixed Deposits but you can make periodical transfers to a recurring deposit instead of a lump sum which is done for a fixed deposit.
It is worthwhile to note that interest earned on recurring deposits has always been fully taxable. This interest is taxed under the head income from other sources, similar to interest income on fixed deposits. Previously, no TDS was deducted on interest income from recurring deposits. Recurring deposits interest will now attract TDS. In case for some reason you have not been adding recurring deposit interest income to your total income, you must include it in your tax return and take credit for the TDS deducted on it by the bank.
2. Interest income from all branches of a bank will be summed up for TDS deduction limit
TDS is deducted when interest income exceeds Rs 10,000 in a financial year. Earlier the sum of interest earned from all fixed deposits held in one branch of a bank was considered for the limit of Rs 10,000. Starting 1st June, the banks will sum up interest earned from all its branches. If interest income from fixed deposits as well as recurring deposits held by you in all the branches of a bank, exceeds Rs 10,000 in a financial year, TDS shall be deducted. Do note that if your total taxable income is less than Rs 2,50,000 and therefore you don't have to pay any tax, you can submit Form 15G or Form 15H as applicable. The bank will not deduct TDS where Form 15G and Form 15H has been duly submitted.
3. TDS on withdrawals from EPF
Your contribution to EPF is deducted @12 per cent on your basic salary. The amount is deposited along with the employer's contribution to a provident fund. Starting 1st June, withdrawals from EPF before completion of 5 years of service will attract a TDS of 10 per cent. Where amount withdrawn from EPF is less than Rs 30,000 no TDS shall be applicable. If you have transferred the EPF balance from previous employer to the current employer, period of previous employment will also be considered while calculating the 5 year term. EPF withdrawals before completion of 5 years are tax exempt - when employment is terminated due to employee's ill health or in case the business of the employer is discontinued or where the reasons for withdrawal are beyond the employee's control.
Quoting your PAN is mandatory at the time of withdrawal. Where PAN is not provided TDS shall be deducted at highest slab rate of 30 per cent.
4. New Rate of Service of 14 per cent shall also become applicable starting 1st June 2015.