Budget 2012: New tax slabs, hike in income tax exemption limit puts more cash in your pocket
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How Budget 2012 will impact you

Finance Minister Pranab Mukherjee has put more cash in your pocket. Every taxpayer is set to gain, on an average, Rs 2,000 per annum.

  • New Delhi,  March 20, 2012  
  • |  
  • UPDATED   16:55 IST

Finance Minister Pranab Mukherjee has put more cash in your pocket. Every taxpayer is set to gain, on an average, Rs 2,000 per annum. Presenting his seventh Budget in the Lok Sabha on Friday, Mukherjee raised the income-tax exemption limit for individuals from Rs 1.8 lakh to Rs 2 lakh. The revised tax slabs will bring relief to some 35 million people in the country.

The upper limit for those falling in the 20 per cent tax slab has been raised to Rs 10 lakh from Rs 8 lakh. But those with incomes above Rs 10 lakh will continue to pay a 30 per cent tax.

Individuals will have to pay a 10 per cent tax on incomes between Rs 2 lakh and Rs 5 lakh; 20 per cent on incomes between Rs 5 lakh and Rs 10 lakh; and 30 per cent on incomes above Rs 10 lakh.

"My proposals on direct taxes are estimated to result in a net revenue loss of Rs 4,500 crore for the year," Mukherjee said. He added that increasing the exemption limit was a move towards implementation of the Direct Taxes Code (DTC).

The Standing Committee of Parliament that scrutinised the DTC Bill had suggested raising the tax exemption limit to Rs 3 lakh. The exemption limit for senior citizens between 60 and 80 years of age will be Rs 2.5 lakh; a 10 per cent tax will be levied on incomes between Rs 2.5 lakh and Rs 5 lakh; 20 per cent on incomes between Rs 5 lakh and Rs 10 lakh; and 30 per cent on incomes above Rs 10 lakh.

FULL COVERAGE:Union Budget 2012-13


For very senior citizens (80 years and above), the income-tax exemption limit will be Rs 5 lakh; 20 per cent will be levied on incomes between Rs 5 lakh and Rs 10 lakh; and 30 per cent on incomes above Rs 10 lakh.

The Budget also provides for a deduction of up to Rs 10,000 for taxpayers for interest earned on savings bank accounts. This would help a large number of small taxpayers with salaries up to Rs 5 lakh and interest from savings bank accounts up to Rs 10,000 as they will not be required to file income-tax returns.

Within the existing limit for deduction allowed for health insurance, the Budget proposed to allow up to Rs 5,000 for preventive health checkups. Senior citizens who do not have any income from business are proposed to be exempted from payment of advance tax to reduce their compliance burden.

However, due to the stringent steps introduced to check black money, a tax will have to be paid at source on the purchase in cash of bullion or jewellery in excess of Rs 2 lakh and transfer of immovable property.

For the e-capital market, the Budget has something to offer by way of reducing the Securities Transaction Tax (STT) from 0.125 per cent to 0.1 per cent as also announcing an income-tax deduction of 50 per cent to new retail investors with income below Rs 10 lakh who invest up to Rs 50,000 directly in equities.

However, this will be allowed only once in lifetime. The finance ministry's chief economic adviser Kaushik Basu said the move was aimed at encouraging more people to invest in the stock market.

This would deepen the Indian stock market and reduce the dependence on foreign institutional investors, who tend to destabilise the market. On implementation of the DTC, Mukherjee said: "We received the report of the Parliamentary Standing Committee on March 9, 2012. We will examine the report expeditiously and take steps for enactment of DTC at the earliest."

Courtesy: Mail Today