Tax Exemptions and other changes - How your personal Income Tax will work after the Budget 2008 proposals

How your personal Income Tax will work after the Budget 2008 proposals.
 

Comparison of Tax liabilities pre-Budget and post-Budget
For Men
Income Tax slab (Rs)	Old tax rate (%)	Old tax (Rs)	New tax rate (%)	New tax (Rs)	Benefit (Rs)
0 to 110,000	Nil	0	Nil	0	0
110,001 to 150,000	10	4,000	Nil	0	4,000
150,001 to 250,000	20	20,000	10	10,000	10,000
250,001 to 300,000	30	15,000	10	5,000	10,000
300,001 to 500,000	30	60,000	20	40,000	20,000
500,001 and above	30		30
1. A person having an income of up to Rs 3 lakh will get a benefit of Rs 24,000
2. A person having an income of up to Rs 5 lakh will get a benefit of Rs 44,000
For Women
Income Tax slab (Rs)	Old tax rate (%)	Old tax (Rs)	New tax rate (%)	New tax (Rs)	Benefit (Rs)
0 to 145,000	Nil	0	Nil	0
145,001 to 150,000	10	500	Nil	0	500
150,001 to 180,000	20	6,000	Nil	0	6,000
180,001 to 250,000	20	14,000	10	7,000	7,000
250,001 to 300,000	30	15,000	10	5,000	10,000
300,001 to 500,000	30	60,000	20	40,000	20,000
500,000 and above	30		30
1. A woman having an income of up to Rs 3 lakh get benefit of Rs 23,500
2. A woman having an income of up to Rs 5 lakh will get a benefit of Rs 43,500

In this calculation education cess component of 3% on the total tax payable is not considered. So a man having an income of up to Rs 5 lakh will actually get a benefit of Rs 44,000+1,320 = 45,320 J
 

For Senior Citizens
Income Tax slab (Rs)	Old tax rate (%)	Old tax (Rs)	New tax rate (%)	New tax (Rs)	Benefit (Rs)
0 to 195,000	Nil	0	Nil	0
195,001 to 225,000	20	6,000	Nil	0	6,000
225,001 to 250,000	20	5,000	10	2,500	2,500
250,001 to 300,000	20	15,000	10	5,000	10,000
300,001 to 500,000	30	60,000	20	40,000	20,000
500,001 and above	30		30
1. Senior citizens having an income of up to Rs 3 lakh will get a benefit of Rs 18,500
2. Senior citizens having an income of up to Rs 5 lakh will get a benefit of Rs 38,500

Tax: How you are affected

 
The salaried class

Finance Minister P Chidambaram has announced changes in the Income Tax slabs. The threshold of exemption for all Income Tax assesses raised from Rs 1, 10,000 to Rs 1, 50,000.  Every income tax assesse will get a relief of a minimum of Rs 4,000. New tax slabs will be: 10 per cent for Rs 1,50,000 to Rs 3,00,000, 20 per cent for Rs 3,00,000 to Rs 5,00,000 and 30 per cent above 5,00,000. An additional deduction of Rs 15,000 under Section 80D has been allowed to an individual who pays medical insurance premium for his/her parents.  For government employees, there is more good news as the Sixth Central Pay Commission will submit report by March 31, 2008, which the finance minister believes will be favorable to government staff. Direct tax proposals to be revenue neutral.

Women

For women, the income tax limit goes up from Rs 145,000 to Rs 180,000. In case of senior women citizens, it increases from Rs 195,000 to Rs 225,000. However, there are few more things that the finance minister has done for the women and housewives. The reduction in some of the customs and excise duties would lead to some goods becoming cheaper, especially medicines, two-wheelers, washing machines, refrigerators, small cars, etc, and this would be a relief to the housewife as she struggles to manage her household within a limited budget. The new tax proposals will give an extra Rs 4,000 per year to her to spend or save.

Senior Citizens

Senior citizens will now have the exemption limit of Rs 225,000 instead of Rs 195,000 previously. An additional deduction of Rs 15,000 under Section 80D has been allowed to an individual who pays medical insurance premium for his/her parents. Senior Citizens Saving Scheme 2004 and the Post Office Term Deposit Account have been added to the basket of saving instruments under Sec.80(C) of the Income Tax Act.  Income Tax Act to be amended to provide that reverse mortgage would not amount to 'transfer'; and the stream of revenue received by the senior citizen would not be 'income.

Small trader, businessman

For the small trader, shopkeeper or corporate, there is some good news too. Central Sales Tax cut to 2% from 3%.No change in corporate income tax. No change in rate of surcharge. For the small trader, shopkeeper or corporate, there is some good news too. Central Sales Tax cut to 2% from 3%. No change in corporate income tax. No change in rate of surcharge. Banking cash Transaction Tax (BCTT) being withdrawn with effect from April 1, 2009.  Parent company allowed to set off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered Dividend Distribution Tax (DDT) and the parent company is not a subsidiary of another company.  Corporate debt instruments issued in demat form and listed on recognized stock exchanges exempted from TDS. Crèche facilities, sponsorship of an employee-sportsperson, organizing sports events for employees and guest houses excluded from the purview of Fringe Benefit Tax.  Threshold limit of exemption for small service providers increased from Rs 8 lakh per year to Rs 10 lakh per year; about 65,000 small service providers go out of the tax net. Fm proposes to insert a new sub-section (11C) in Section 80-IB to grant a five-year tax holiday to hospitals located in any place outside the urban agglomerations especially in tier-2 and tier-3 towns; this window will be open for the period April 1, 2008 to March 31, 2013.

Professionals, self-employed

Four services brought under service tax net namely, asset management service provided under ULIP, services provided by stock/commodity exchanges and clearing houses; right to use goods, in cases where VAT is not payable; and customized software, to bring it on par with packaged software and other IT services. Tax income arising from saplings or seedlings grown in a nursery exempted. Business of production of seeds and manufacture of agricultural implements added to the list of companies allowed weighted deduction of 150 per cent on any expenditure on in-house scientific research. Benefit of amortization of certain preliminary expenses under Section 35D allowed assessing in the services sector.

Self-employed professionals, like doctors, etc, too will be impacted by the Budget proposals.

Brokers, stock market players

The stock market players will, however, not find the going very amusing. The rate of tax on short-term capital gains under Section 111A & Section 115AD has been increased to 15 per cent from 10 per cent. However, Securities Transaction Tax (STT) paid will be treated like any other deductible expenditure against business income. Levy of STT, in the case of options to be only on premium, where the option is not exercised; liability to be on the seller; where the option is exercised, levy to be on the settlement price and the liability on the buyer; no change in the present rates. No change in STT and DDT unchanged at 15%. However, there is no tax for the investor. Permanent Account Number (PAN): Requirement of PAN extended to all transactions in the financial market subject to suitable threshold exemption limits. National market for securities: Empowered Committee of State Finance Ministers to be requested to work with the central government to create pan Indian market for securities that will expand the market base and enhance the revenues of the State governments. Measures to expand the market for corporate bonds: Exchange-traded currency and interest rate futures to be launched and transparent credit derivatives market to be developed with appropriate safeguards; Tradability of domestic convertible bonds to be enhanced through the mechanism of enabling investors to separate the embedded equity option from the convertible bond, and trade it separately; Development of a market-based system for classifying financial instruments based on their complexity and implicit risks to be encouraged. Meanwhile, a new Commodities Transaction Tax (CTT) to be introduced on the same lines as STT on options and futures.