Income Tax Slabs
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With the rising inflation and the global recession in the last year, the Common Man was certainly looking up to Budget 2010 and hoping for reasonable tax reliefs. The Finance Minister (FM) had the daunting task of balancing the fiscal deficit. He has definitely made an attempt by making some changes to the existing individual tax regime.
The FM acknowledged that the globally accepted phenomenon of increase in tax compliance being directly proportional to reduction of tax rates is true for India as well. With an intention to provide the common man with more net disposable income to combat the inflationary trends, the existing income slabs subject to tax have been modified. Without changing the tax rates or the minimum annual threshold not taxable, the FM has increased the income threshold at which the higher rates of tax apply. This can be tabulated as under:
NIL - CURRENT Up to 1,60,000 - PROPOSED Up to 1,60,000* -
10% - CURRENT 160,001- 3,00,000 - PROPOSED 160,001 - 5,00,000
20% - CURRENT 3,00,001- 5,00,000 - PROPOSED 5,00,001 - 8,00,000
30% - CURRENT Above 500,000 - PROPOSED Above 800,000
*For Resident Females Rs.1,90,000 and for resident Senior citizens Rs.2,40,000
However, the much talked about education cess remains at 3 per cent. The above changes will result in a maximum annual tax savings of upto Rs.20,600 for people with an annual income of Rs.5,00,000 or below. Also it will translate into an annual tax savings in the range of Rs 20,601 to Rs. 51,500 for people earning higher than Rs.5,00,000. Interestingly, a person with an annual income less than Rs.3,00,000 will not be impacted by this changes at all.
In line with the policy of boosting the infrastructure sector by promoting investments, an individual who invests in long term infrastructure bonds (to be notified by the Government) will now get an additional deduction for the amount invested in such bonds to the extent of Rs. 20,000. This is a good measure as presently there is a tax deduction limit of Rs 100,000 which is anyways having various investment options all lumped up together. An individual who invests in these infrastructure bonds will also be able to get incremental tax reliefs.
Regarding the provisions relating to certain gift transactions being classified as taxable income, a welcome change is that immovable property transferred for inadequate consideration is no longer subject to tax in the hands of the recipient of the property. In many such immovable property transfer transactions, there is a significant time gap between the booking of the property and obtaining possession of the same.
This invariably results in a difference between the consideration agreed at the time of booking and the value existing at the time of registration of the property. This difference may result in a taxable income, as the consideration agreed could be inadequate as compared to the value at the time of registration. To avoid such an unintended situation, it is now proposed to remove the condition of “inadequate consideration” in respect of transfer of immoveable properties. Accordingly, only the condition of “transfer without consideration” is proposed to be applicable for immoveable property transactions to be taxable in the hands of the recipient of the property.
Continuing the Government’s endeavor to simplify tax administration, individual salaried tax payers will now be able to furnish their return in a simpler two pager SARAL-2D form. This will hopefully further enhance voluntary tax compliance.
The FM was persuaded to increase the taxable income slab rates, by the response of the Aam admi in increasing the tax compliance and consequently the tax collections. However, the endeavor is also to be equally vigilant on obtaining more information on the “foreign bank accounts” of resident Indians. The Government believes this can be achieved by enhanced exchange of banking information with various countries which will be facilitated by the bilateral discussions commenced with other countries.
Having said this, the FM has reiterated his commitment to make the draft new tax code effective from 1 April 2011. It remains to be seen whether and when it actually does go live! Overall a pro-Aam Admi Budget 2010.
.
With the rising inflation and the global recession in the last year, the Common Man was certainly looking up to Budget 2010 and hoping for reasonable tax reliefs. The Finance Minister (FM) had the daunting task of balancing the fiscal deficit. He has definitely made an attempt by making some changes to the existing individual tax regime.
The FM acknowledged that the globally accepted phenomenon of increase in tax compliance being directly proportional to reduction of tax rates is true for India as well. With an intention to provide the common man with more net disposable income to combat the inflationary trends, the existing income slabs subject to tax have been modified. Without changing the tax rates or the minimum annual threshold not taxable, the FM has increased the income threshold at which the higher rates of tax apply. This can be tabulated as under:
NIL - CURRENT Up to 1,60,000 - PROPOSED Up to 1,60,000* -
10% - CURRENT 160,001- 3,00,000 - PROPOSED 160,001 - 5,00,000
20% - CURRENT 3,00,001- 5,00,000 - PROPOSED 5,00,001 - 8,00,000
30% - CURRENT Above 500,000 - PROPOSED Above 800,000
*For Resident Females Rs.1,90,000 and for resident Senior citizens Rs.2,40,000
However, the much talked about education cess remains at 3 per cent. The above changes will result in a maximum annual tax savings of upto Rs.20,600 for people with an annual income of Rs.5,00,000 or below. Also it will translate into an annual tax savings in the range of Rs 20,601 to Rs. 51,500 for people earning higher than Rs.5,00,000. Interestingly, a person with an annual income less than Rs.3,00,000 will not be impacted by this changes at all.
In line with the policy of boosting the infrastructure sector by promoting investments, an individual who invests in long term infrastructure bonds (to be notified by the Government) will now get an additional deduction for the amount invested in such bonds to the extent of Rs. 20,000. This is a good measure as presently there is a tax deduction limit of Rs 100,000 which is anyways having various investment options all lumped up together. An individual who invests in these infrastructure bonds will also be able to get incremental tax reliefs.
Regarding the provisions relating to certain gift transactions being classified as taxable income, a welcome change is that immovable property transferred for inadequate consideration is no longer subject to tax in the hands of the recipient of the property. In many such immovable property transfer transactions, there is a significant time gap between the booking of the property and obtaining possession of the same.
This invariably results in a difference between the consideration agreed at the time of booking and the value existing at the time of registration of the property. This difference may result in a taxable income, as the consideration agreed could be inadequate as compared to the value at the time of registration. To avoid such an unintended situation, it is now proposed to remove the condition of “inadequate consideration” in respect of transfer of immoveable properties. Accordingly, only the condition of “transfer without consideration” is proposed to be applicable for immoveable property transactions to be taxable in the hands of the recipient of the property.
Continuing the Government’s endeavor to simplify tax administration, individual salaried tax payers will now be able to furnish their return in a simpler two pager SARAL-2D form. This will hopefully further enhance voluntary tax compliance.
The FM was persuaded to increase the taxable income slab rates, by the response of the Aam admi in increasing the tax compliance and consequently the tax collections. However, the endeavor is also to be equally vigilant on obtaining more information on the “foreign bank accounts” of resident Indians. The Government believes this can be achieved by enhanced exchange of banking information with various countries which will be facilitated by the bilateral discussions commenced with other countries.
Having said this, the FM has reiterated his commitment to make the draft new tax code effective from 1 April 2011. It remains to be seen whether and when it actually does go live! Overall a pro-Aam Admi Budget 2010.
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