Stock markets have given the budget a thumbs down; on last count, the BSE Sensex had shed nearly 800 points and was southbound. Maybe it was something to do with the fiscal deficit forecast (6.8% of GDP) or possibly the markets expected far more concrete announcements in areas like disinvestment. Perhaps, the expectations of a 'big-bang' budget were too much to live up to. However, individual tax payers are likely to have a different view. In all fairness, the budget has enough to elicit a nod of approval from them.
Here are some of the major provisions:
1. Exemption limit for personal income tax hiked
Lower taxes are universally welcomed with cheers, and this move will be received equally warmly. The exemption limit for personal income tax has been hiked by Rs 10,000 i.e. from Rs 150,000 to Rs 160,000. For women tax payers, the new threshold limit is Rs 1,90,000 vis-à-vis the erstwhile limit of Rs 1,80,000. Senior citizens stand to benefit the most. With an increase of Rs 15,000, the exemption limit has risen from Rs 2,25,000 to Rs 2,40,000.
2. Surcharge on personal income tax abolished
The Finance Minister (FM) announced his intent to phase out surcharge on various direct taxes. To begin with, he has eliminated the 10% surcharge presently applicable on personal income tax. Another move that will help reduce the tax outlay, much to the delight of assessees
3. Fringe Benefit Tax abolished
This one is meant for corporates and salaried individuals. Ever since its introduction in budget 2005-06, the Fringe Benefit Tax has been the subject of much debate and discussion. Industry captains have in unison debunked the same. With the tax being abolished, the FM has acknowledged popular sentiment.
4. Section 80DD deduction limit hiked
The deduction limit for Section 80DD, which covers expenses incurred for maintenance (including medical treatment), of a dependent who is a person with severe disability has been raised from Rs 75,000 (at present) to Rs 100,000.
5. Donations to electoral trusts
The FM also has something in store for the politically inclined. He has proposed that donations to electoral trusts be eligible for a 100% deduction in the donor's computation of income. For this purpose, electoral trusts will be trusts that are set up as pass-through vehicles for routing the donations to political parties, and are approved by CBDT.
The sleeper benefit
It was widely speculated that the small savings segment would undergo a rationalisation i.e. interest rates on popular avenues like the PPF and NSC would be reduced. None of that transpired. In fact, the small savings segment has been left untouched. In other words, investors can continue to enjoy assured returns coupled with attractive interest rates and tax sops. That is a big positive. Notwithstanding the softer interest rate regime, the small savings segment continues to be a haven for risk-averse investors.
The dampener
Some might argue that not much was done for investors in the New Pension System (NPS); the FM stated that the NPS would continue to be subject to the E-E-T method of taxation. Popular opinion suggested that NPS would be brought within the gamut of Section 80C; also, speculation was rife that the annuity/maturity sum received by investors would be made tax-free. However, one must appreciate that these are early days for the NPS. Also, tax benefits spelt out for the NPS trust should be seen as indicators of the importance being accorded to the scheme. Going forward, it shouldn't be surprising, if the NPS is subject to a far more benevolent taxation method. In any case, the FM did his bit for NPS by allowing self-employed individuals to participate in the scheme and avail tax benefits thereof.
As mentioned earlier, those who expected a 'big-bang' budget are likely to be disappointed. However, while evaluating the budget, it would only be fair to take into account the challenging economic environment and circumstances that we are faced with. Given the constraints, it can be safely stated that the budget has more 'yeas' than 'nays' for individuals.
Here are some of the major provisions:
1. Exemption limit for personal income tax hiked
Lower taxes are universally welcomed with cheers, and this move will be received equally warmly. The exemption limit for personal income tax has been hiked by Rs 10,000 i.e. from Rs 150,000 to Rs 160,000. For women tax payers, the new threshold limit is Rs 1,90,000 vis-à-vis the erstwhile limit of Rs 1,80,000. Senior citizens stand to benefit the most. With an increase of Rs 15,000, the exemption limit has risen from Rs 2,25,000 to Rs 2,40,000.
2. Surcharge on personal income tax abolished
The Finance Minister (FM) announced his intent to phase out surcharge on various direct taxes. To begin with, he has eliminated the 10% surcharge presently applicable on personal income tax. Another move that will help reduce the tax outlay, much to the delight of assessees
3. Fringe Benefit Tax abolished
This one is meant for corporates and salaried individuals. Ever since its introduction in budget 2005-06, the Fringe Benefit Tax has been the subject of much debate and discussion. Industry captains have in unison debunked the same. With the tax being abolished, the FM has acknowledged popular sentiment.
4. Section 80DD deduction limit hiked
The deduction limit for Section 80DD, which covers expenses incurred for maintenance (including medical treatment), of a dependent who is a person with severe disability has been raised from Rs 75,000 (at present) to Rs 100,000.
5. Donations to electoral trusts
The FM also has something in store for the politically inclined. He has proposed that donations to electoral trusts be eligible for a 100% deduction in the donor's computation of income. For this purpose, electoral trusts will be trusts that are set up as pass-through vehicles for routing the donations to political parties, and are approved by CBDT.
The sleeper benefit
It was widely speculated that the small savings segment would undergo a rationalisation i.e. interest rates on popular avenues like the PPF and NSC would be reduced. None of that transpired. In fact, the small savings segment has been left untouched. In other words, investors can continue to enjoy assured returns coupled with attractive interest rates and tax sops. That is a big positive. Notwithstanding the softer interest rate regime, the small savings segment continues to be a haven for risk-averse investors.
The dampener
Some might argue that not much was done for investors in the New Pension System (NPS); the FM stated that the NPS would continue to be subject to the E-E-T method of taxation. Popular opinion suggested that NPS would be brought within the gamut of Section 80C; also, speculation was rife that the annuity/maturity sum received by investors would be made tax-free. However, one must appreciate that these are early days for the NPS. Also, tax benefits spelt out for the NPS trust should be seen as indicators of the importance being accorded to the scheme. Going forward, it shouldn't be surprising, if the NPS is subject to a far more benevolent taxation method. In any case, the FM did his bit for NPS by allowing self-employed individuals to participate in the scheme and avail tax benefits thereof.
As mentioned earlier, those who expected a 'big-bang' budget are likely to be disappointed. However, while evaluating the budget, it would only be fair to take into account the challenging economic environment and circumstances that we are faced with. Given the constraints, it can be safely stated that the budget has more 'yeas' than 'nays' for individuals.
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