By presenting the Union Budget 2009-10, the Finance Minister has laid down the roadmap for the economic growth for the next one year. The major challenge for the government is to put the economy back on track and achieve the GDP growth rate of 9% p a.
 

The major focus area for the government includes:

Infrastructure – increase in allocation to highways and railways, drainage project, power, housing and basic amenities to the urban poor

Agriculture - debt relief to farmers

Giving boost to exports

Disinvestment of select Public Sector Units

Rural employment through allocation of Rs 39,100 cr to National Rural Employment Guarantee Scheme (NREGS)

However, Fiscal Deficit remains an area of concern for the economy. As a percentage of GDP, it is projected at 6.8 per cent for 2009-10.

In our post-budget analysis let us see what it offers in general and how it is going to impact the common man.

1. Basic exemption limit for Income Tax increased
This is the third time in a row that the basic exemption limit has been increased. For senior citizens, the limit has been increased from Rs 225,000 to Rs 240,000. Similarly, for women assessee, the limit has been increased to Rs 190,000 from Rs 180,000. For all other individual assesses, the same stands increased at Rs 160,000 from Rs 150,000.

2008-09 Taxable Income (Rs) 900,000 Upto Rs 150,000 Nil - Rs 150,001 to Rs 300,000 10% 15,000 Rs 300,001 to Rs 500,000 20% 40,000 Rs 500,001 & above 30% 120000 Tax payable 175,000 Education Cess 3% 5250 Total Tax (Rs) 180,250

2009-10 Taxable Income (Rs) 900,000 Upto Rs 160,000 Nil - Rs 160,001 to Rs 300,000 10% 14,000 Rs 300,001 to Rs 500,000 20% 40,000 Rs 500,001 & above 30% 120000 Tax payable 174,000 Education Cess 3% 5220 Total Tax (Rs) 179,220

Some numbers will help us better appreciate the impact of this move. Let’s take the case of an individual whose net taxable income is Rs 900,000. As per the current tax laws his income tax liability will be Rs 180,250. After the increase in basic exemption limit, his tax liability will work out to Rs 179,220, i.e. a saving of Rs 1,030.

2. Surcharge abolished
Earlier a surcharge of 10% was levied on the tax payable for income in excess of Rs 10 lakhs. For a long time, there has been a demand to do away with the surcharge. Finally, the Finance Minister has abolished the same. The example below explains how an individual whose total income is in excess of Rs 10 lakhs will benefit from this move.

2008-09 Taxable Income (Rs) 1,100,000 Upto Rs 150,000 Nil - Rs 150,001 to Rs 300,000 10% 15,000 Rs 300,001 to Rs 500,000 20% 40,000 Rs 500,001 & above 30% 180000 Tax payable before surcharge 235,000 Surcharge 10% 23,500 Tax payable after surcharge 258,500 Education cess 3% 7,755 Total Tax Payable (Rs) 266,255

2009-10 Taxable Income (Rs) 1,100,000 Upto Rs 160,000 Nil - Rs 160,001 to Rs 300,000 10% 14,000 Rs 300,001 to Rs 500,000 20% 40,000 Rs 500,001 & above 30% 180000 Tax payable before surcharge 234,000 Surcharge 0% 0 Tax payable after surcharge 234,000 Education cess 3% 7,020 Total Tax Payable (Rs) 241,020

Let’s take the case of an individual whose net taxable income is Rs 1,100,000. After the abolition of surcharge, his tax liability works out to Rs 241,020 as against Rs 266,255 as per the current tax laws, i.e. a saving of Rs 25,235.

3. Section 80-DD limit raised
Section 80-DD provides deduction in respect of expenditure incurred on the maintenance and medical treatment, of a dependent who is a person with severe disability. The deduction amount has been increased from Rs 75,000 to Rs 100,000.

4. Scope of Section 80E extended
Section 80E provides for a deduction in respect of interest on loan taken for pursuing higher education in specified fields of study. The scope of this provision has been extended to cover all fields of study, including vocational studies pursued after completion of schooling.

5. Fringe Benefit Tax (FBT) abolished
FBT on the value of certain fringe benefits provided by employers to their employees has been abolished. This would impact the employees positively, especially employees who have availed of Employee Stock Options (ESOPs) offered by their employers.

6. SARAL - 2 Forms to be introduced soon
The Finance Minister has taken the first step towards simplifying the tax laws. The income tax return form will be made simple and user-friendly. SARAL - 2 will be introduced soon.

Add Comments