Wednesday, March 16, 2011


The expectations that there will be changes in the taxation avenues and their slabs, in the recent budget , have not been met. The Union Budget 2011-12 has given a marginal benefit on the tax slab for individuals. However, unexpectedly the benefits for very senior citizens are much higher.

The basic slab for income tax has been proposed to be raised to Rs 1.8 lakh (Rs 180,000) from the current Rs 1.6 lakh (Rs 160,000). This leads to a savings of Rs 2,000 for all tax payers. Yet most of the taxpayers are not a happier lot today.

Also for senior citizens the slab has been increased from Rs 2.4 lakh (Rs 240,000) to Rs 2.5 lakh (Rs 250,000).

The slab for women has not been changed from the earlier Rs 1.9 lakh (Rs 190,000). Though the finance Minister did not mention this in his Budget Speech, this has been included in the documents submitted along with the budget statement.

For the first time the finance ministry has aligned with other departments and has reduced the age for senior citizens from 65 years to 60 years. All the people who are in the verge of retirement and who are bellow sixty-five years of age are very happy. The Finance Minister has brought parity in finance bill this year redefining the age of senior citizen. For all other purpose the age for senior citizen was already considered as sixty save and except in Finance bill. Till now the age for senior citizens has been 60 for all departments (think about railway ticket booking, and senior citizens fixed deposit at banks) except the Income Tax Department.

Also the finance minister has created a new slab for Very Senior Citizens -- for people who are aged eighty years and above. The income tax exemption limit proposed for this group is Rs 5 lakh (Rs 500,000). T^his is an useless exercise for there are very few tax payers of significance above Eight years. It would have been real beneficial if this benefit could have started at 75 years. Alternately limit of benefit could have been staggered for senior citizens at the rate Rs. Two lakh fifty thousand at Sixty years, Rs. Three lakh from 70 years, Rs Four Lakh from 75 years and Rs Five lakh for 80 years and above. A little practicale approach would have helped one of the largest segment of gray citizen of the society.

The finance minister has not proposed to change any of the tax savings instruments this year before the DTC gets implemented next year. This is understandable .

The investment in infrastructure bonds upto Rs 20,000 over and above the Rs 1 lakh (Rs 100,000) limit in Section 80C, which was introduced last year, continues for the next year too.

The finance minister has proposed to allow selected government undertakings to borrow up to Rs 30,000 crore (Rs 300 billion) for the development of infrastructure.

These borrowings will be in the form of tax free bonds. Individuals can look to investing in these bonds for tax free returns. The limits set for different government organizations are: Railway Finance Corporation -- Rs 10,000 crore (Rs 100 billion); National Highways Authority of India -- Rs 10,000 crore (Rs 100 billion); HUDCO -- Rs 5,000 crore (Rs 50 billion) and Ports -- Rs 5,000 crore (Rs 50 billion).

For self employed professionals and small business people, the process of doing an audited filing is very time consuming.

The finance minister has recognised this and has extended the limit of self assessment to Rs 60 lakh (Rs 6 million). This will be a big relief to many professionals and proprietorship companies.

To extend the benefit further, the finance minister has proposed to forgo the interest penalty on delayed filing of taxes to an extent of 3%.

Though there were many expectations in the personal income tax front from the budget, the finance minister has been docile in not changing much.

There have not been any significant changes either in the personal income tax slabs or in tax saving avenues.

However introduction of the very senior citizen category and reducing the age for the senior citizens' slab are welcome measures. We felt instead of the giving tax benefit to eighty years and above the finance Minister could have given all the citizen two important benefits. Those benefits are higher tax benefit on the policy of Health Insurance p remium and secondly one percent higher return on deposit of PPF. If Government of India can concede to pay higher interst rate to EPF and GPF why not they can consider the case of senior citizens subscribing to PPF. Perhaps vast majority of senior citizens of country do not have a common platform to raise their weak voice.


No comments: