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The TRUE impact of Budget on your tax, money!

Last updated on: March 9, 2011 15:18 IST

The TRUE impact of Budget on your tax, money!

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Mahesh Padmanabhan


The Union Budget 201-12 does not have too many radical proposals and it seeks to strike a balance between growth and populism with its proclaimed intent to bring down the fiscal deficit. Overall, it can be said to be a budget for the long-term investor.

In the following analysis, RelaxwithTax has tried to squeeze out the useful information -- from the Budget Speech delivered by Finance Minister Pranab Mukherjee -- that is relevant to you in terms of personal taxation and finance.

Click NEXT to check out how the Budget impacts your finances and taxes in the following pages . . .

Also check out the Tax Calculator!

Click NEXT to read on . . . 


The author is principal advisor, direct tax group, RelaxwithTax Consultants Pvt Ltd. RelaxwithTax is a Mumbai-based personal tax & finance solutions provider offering a wide range of services.


Photographs: Uttam Ghosh/Rediff.com
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But first, a snapshot

1. Finance minister seems to tell the taxpayer 'Keep the change': Income Tax slab increased (though a very small increase) for Resident Males, Non-Residents and Senior Citizens.

2. FM seemingly sings 'Dil toh Bachha hai ji': Qualifying age limit for Senior Citizen, lowered from 65 years to 60 years.

3. FM's gift to the 'young at heart': Provision of higher exemption limit for very senior citizen's of 80 years or more.

4. FM aims at 'equality for women': No new tax exemptions for women.

5. FM 'means business': New Central Processing Centres to be set up for faster processing of income tax returns and refunds.

6. FM says Khana phir Rona: Air-conditioned hotel accommodation and restaurants to attract levy service tax.

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Image: Finance Minister Pranab Mukherjee.
Photographs: Reuters
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The TRUE impact of Budget on your tax, money!

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7. FM's taxes fly high: Domestic and international air travel to attract flat amount of service tax. Additionally, higher class travel in the domestic sector to attract 10 per cent service tax.

8. FM's 'bitter pill': Hospitals with 25 beds or more with central air-conditioning to levy service tax on all patients. Diagnostic test centres also to levy service tax.

9. FM believes 'Taxes, life ke saath bhi aur bhaad bhi': Services provided by life insurance companies in the area of investments also to be covered under the levy of service tax.

10. FM's Sugam, hopefully will be good: New simplified Income Tax return form 'Sugam' to be introduced for small businessmen.

11. FM, a little less "Dabaang": Relief from audit for small service taxpayers with turnover lower than Rs 60 lakh (Rs 6 million).

Click NEXT to read on find out how the Bugdet impacts YOU . . . 


Photographs: Uttam Ghosh/Rediff.com
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The TRUE impact of Budget on your tax, money!

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How does the Budget 2011 impact you

Understand how the budget proposals impact your finances directly / indirectly.

Increase in exempt income slab

Category

Existing Zero Tax Slab (Rs)

Proposed Zero Tax Slab (Rs)

Tax Savings (Rs)

Resident Men

160,000

180,000

2,060

Non-Residents

160,000

180,000

2,060

Senior Citizens (age over 60 but less than 80)

240,000

250,000

1,030

Senior Citizens (age 80)

240,000

250,000

26,780

Resident Women

190,000

190,000

Nil

Impact Analysis

The enhanced slab for exemption seems to be only token and would not greatly impact the reduction of the tax bill for resident male, Non-Resident Indians and senior citizens below the age of 80.

This token increase has however eluded the women folk with no enhancements coming their way.

Click NEXT to read on . . . 


Photographs: Uttam Ghosh/Rediff.com
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The TRUE impact of Budget on your tax, money!

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Lowered qualifying age criteria

A major relief coming the way of Senior Citizens is the lowering of the qualifying age to 60 years from the earlier 65 years.

Impact Analysis

Senior Citizen need not wait for 5 years post retirement to attain the special status of 'Senior Citizen' in tax parlance.

With this change, senior citizens can plan their income post retirement seamlessly and enjoy lowered tax scenario, once their regular flow of income is stopped.

It is still unclear whether this lowering of age would also be considered for the purpose of availing the enhanced deduction under section 80D for premium paid towards health insurance & 80 DDB for treatment of specified diseases.

The fine print in the proposed bill would need to be checked to ensure availability of the benefit.

Click NEXT to read on . . . 


Photographs: Uttam Ghosh/Rediff.com
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The TRUE impact of Budget on your tax, money!

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Special treatment to very senior citizens

The finance minister has introduced a new slab for senior citizens in the age group of over 80 years with an exemption slab of Rs 5 lakh (Rs 500,000).

Impact Analysis

This move would put additional money in the hands of this segment of senior citizens empowering them to lead a comfortable life.

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Photographs: Uttam Ghosh/Rediff.com
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The TRUE impact of Budget on your tax, money!

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Increased scope of Service Tax

With the extension of service tax to the areas of hotels, air travel, hospitals and life insurance companies, the overall cost of entertainment, travel and healthcare would go up thus adversely impacting personal finances.

Impact Analysis

The negative impact that would be borne by individuals is as follows:

Entity

Effective Rate

Financial Impact

Hotel stay  (Tariff of Rs 1,000 per day)

5%

Rs 50 extra per Rs 1,000

Air-conditioned restaurant

3%

Rs 30 extra per Rs 1,000

Domestic air travel (economy)

NA

Flat tax of Rs 50

Domestic air travel (higher class)

10%

Rs 100 extra per Rs 1,000

International air travel (economy)

NA

Flat tax of Rs 250

Hospitals (25 beds and central AC)

5%

Rs 50 extra per Rs 1,000

Diagnostic tests

5%

Rs 50 extra per Rs 1,000


Photographs: Reuters
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