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How will your tax outgo change?

Union Budget - Personal Taxation

An average taxpayer may not be too excited with Budget 2000. However, with India already being one of the low-tax countries of the world, one need not be too disappointed.

Some positive features

• Doubling of tax rebate for principal repayment on housing loans to Rs 20,000. (It must be pointed out that further measures to boost the housing sector were expected)
• Relaxation of provisions of Section 54F, related to exemption of reinvested capital gains from tax even if one owns another house at the point of sale.
• Extension of the scheme by two years (till March 31, 2003) for completion/acquisition of property for availing interest on home loans upto Rs 75,000.
• Introduction of tax rebate of Rs 5,000 for working women.
• Enhancement of tax rebate for senior citizens to Rs 15,000 (from Rs 10,000).
• Enhancement in the deduction allowed for repayment of certain educational loans upto Rs 40,000 from the earlier limit of Rs 25,000.

Higher Taxes

The only significant taxpayer-unfriendly measure in this Budget is the imposition of a higher surcharge at 15 per cent (earlier 10 per cent) for taxable income exceeding Rs 150,000. However, the impact will not be so high, in relation to the overall income earned by the individual. For instance, an individual earning Rs 500,000 per annum will need to fork out an additional Rs 6,200 only, which is just 1.2 per cent on the overall income earned.

A table indicating the additional tax liability is given below for easy reference:

Income Tax (including surcharge)

Annual Taxable Income (Rs)	Current Rates (Rs)	Revised Rates (Rs)	Additional Tax Burden (Rs)	Addl Tax as a % of Income	Addl Tax as a % of Current Tax
50,000	—	—	—	0	0
60,000	1000	1000	—	0	0
90,000	7700	7700	—	0	0
120,000	14,300	14,300	—	0	0
150,000	20,900	20,900	—	0	0
180,000	30,800	32,200	1400	0.8	4.5
210,000	40,700	42,250	1850	0.9	4.5
300,000	70,400	73,600	3200	1.1	4.5
400,000	103,400	108,100	4700	1.2	4.5
500,000	136,400	142,600	6200	1.2	4.5
600,000	169,400	177,100	7700	1.3	4.5
700,000	202,400	211,600	9200	1.3	4.5
800,000	235,400	246,100	10,700	1.3	4.5
900,000	268,400	280,600	12,200	1.4	4.5
1,000,000	301,400	315,000	13,700	1.4	4.5

Unfulfilled expectations

• Taxing the stock option related gains only when the shares are sold, as against the current rules of taxing them at the exercise of options.
• Enhancement in the maximum amount allowed to be invested under section 88 for tax rebate (say upto Rs 100,000) to reflect the current validity and reasonableness of the limit.
• Allowing the deduction of interest paid on home loans in respect of self-occupied property in full as in the case of let-out property.

Summary

Unusually yet understandably, this Budget contains very few beneficial provisions relating to individual taxpayer. However, one can take comfort from the fact that no harsh measures were imposed, despite the burgeoning fiscal deficit. One question that a tax-payer is justified in raising at this stage is: "Is the government taking appropriate measures to ensure that the taxes collected are effectively utilised in achieving the intended objective and in enhancing the quality of life for an average Indian citizen?"

ALSO SEE:

BUDGET IMPACT

The first cut

A matter of life and debt

On the MAT

SECTOR IMPACT:

Automobiles | Banking | Cement | Cigarettes | Computer hardware
Fertilisers | Housing | Paper | Pharmaceuticals | Software | Telecom
Tyres

PRELUDE TO THE BUDGET

What will Yashwant Sinha do?

How will personal taxes change?

Fiscal report card

PRE-BUDGET SECTOR ANALYSIS:

Automobiles | Cement | Cigarettes | Fertilisers | Hotels | Housing
Mutual funds | Paints | Paper | Petrochemicals | Pharmaceuticals
Power | Software | Steel | Tea and coffee

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