The Budget 2012 received varied response from various pockets of the society. Some say it’s a non-event and others believe it to be a good attempt in a situation of political pressures and rising fiscal deficit. On direct taxes front, more importantly, the Finance Minister this time removed the distinction between ‘men’ and ‘women’ as regards tax exemption limit is concerned. However, the exemption limit for the Senior citizens stands unchanged at Rs 250,000.
Although there were no clear signs about the implementation of the much awaited Direct Tax Code (DTC), the Budget 2012 laid down some tax sops for the common man and moved a step closer to DTC, by increasing the base exemption limit, and changing the tax slabs as under:
| Income-tax rates in Budget 2012 |
| Taxable Income |
Tax Rate |
| Upto Rs 200,000 |
Nil |
| Rs 200,001 to Rs 500,000 |
10% |
| Rs 500,001 to Rs 10,00,000 |
20% |
| Rs 10,00,001 & above |
30% |
This thus has put in more disposable income in the hands of the individuals, as the base exemption limit has been increased from Rs 180,000 at present, to Rs 200,000. Moreover the tax slabs have also been changed in order to further boost the disposable income. The higher tax bracket would now be applicable to individuals earning more than Rs 10,00,000 instead of earlier limit of Rs 800,000. To better understand the above changes on your taxable let’s have a look at the example below.
| 2011-12 |
| Taxable Income (Rs) |
|
10,00,000 |
| Upto Rs 180,000 |
Nil |
|
| Rs 180,001 to Rs 500,000 |
10% |
32,000 |
| Rs 500,001 to Rs 800,000 |
20% |
60,000 |
| Rs 800,001 & above |
30% |
60,000 |
| Tax payable |
|
152,000 |
| Education Cess |
3% |
4,560 |
| Total Tax (Rs) |
|
156,560 |
|
|
| 2012-13 |
| Taxable Income ( Rs ) |
|
10,00,000 |
| Upto Rs 200,000 |
Nil |
|
| Rs 200,001 to Rs 500,000 |
10% |
30,000 |
| Rs 500,001 to Rs 10,00,000 |
20% |
100,000 |
| Rs 10,00,001 & above |
30% |
|
| Tax payable |
|
130,000 |
| Education Cess |
3% |
3,900 |
| Total Tax (Rs) |
|
133,900 |
|
An individual earning Rs 10,00,000 would now stand to benefit from the changes in the tax slabs and the exemption limit. In the table above the individual’s total tax payable reduces by Rs 22,660 (Rs 156,560 – Rs 133,900).
In addition to this, the Budget 2012 has also laid down a few sweeteners:
- Exemption of upto Rs 10,000 for interest from savings bank accounts for individual tax payers
- Deduction of upto Rs 5,000 for preventive health check up
- Senior citizens not having income from business proposed to be exempted from payment of advance tax
- Exemption from Capital Gains tax on sale of residential property, if sale consideration is used for subscription in equity of a manufacturing SME for purchase of new plant and machinery.
However, the Budget 2012 was silent on the extension to the section 80CCF created for long-term infrastructure bonds, which allowed an individual to claim deduction of an amount upto Rs 20,000. Thus, we assume that the said section may not be extended in the financial year 2012-13.
Impact on the individual tax payers...
The changes made to the direct taxes will have a positive impact for individual tax payers. However, if section 80CCF is not retained, individual tax payers will stand to lose additional tax benefit by investing in long-term infrastructure bonds a sum of upto Rs 20,000, (which is over and above the limit available under section 80C).
Our view:
In our opinion Budget 2012, (in the midst of fiscal problems) has given due attention to the individual tax payers to give them some respite from the soaring price rises (inflation). This can be considered as a one more step closer in migrating to the Direct Tax Code (DTC) regime. But a timeline on the implementation of the much awaited DTC, if it had been announced by the Finance Minister (in Budget 2012), would have given a direction to the "aam aadmi".
To read the complete coverage on the Budget 2012 please click here.
Disclaimer: This newsletter is for Private Circulation only and not for sale, is only for information purposes and Quantum Information Services Pvt Limited (PersonalFN) is not providing any professional/investment advice through it and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. PersonalFN disclaims warranty of any kind, whether express or implied, as to any matter/content contained in this newsletter, including without limitation the implied warranties of merchantability and fitness for a particular purpose. PersonalFN and its subsidiaries / affiliates / sponsors / trustee or their officers, employees, personnel, directors will not be responsible for any direct/indirect loss or liability incurred by the user as a consequence of his or any other person on his behalf taking any investment decisions based on the contents of this newsletter. Use of this newsletter is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. PersonalFN does not warrant completeness or accuracy of any information published in this newsletter. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This newsletter is for your personal use and you shall not resell, copy, or redistribute this newsletter, or use it for any commercial purpose. The user accepts the terms of use on this web site.
Add Comments