GUIDE TO PERSONAL TAX

Proposal:

The basic threshold limits for income-tax trigger are proposed to be changed marginally. However, there is no change in the number of slabs or the tax rates for every slab (which remain at 10%, 20% and 30%) or education cess (3%).

Impact:

Now those having taxable income of Rs 1,60,000 (earlier Rs 1,50,000) or less are out of I-T ambit. For women and senior citizens, the basic threshold exemption limit would be at Rs 1,90,000 (earlier Rs 1,80,000) and Rs 2,40,000 (earlier Rs 2,25,000) respectively. This results in an effective tax savings of at least Rs 1,030 (Rs 1,545 for senior citizens) for small and marginal tax payers.

Proposal:

Surcharge at 10% on amount of tax is proposed to be abolished.

Impact:

This means substantial savings for those with high incomes (over Rs 10,00,000).

Proposal:

Deduction for expenditure incurred on medical treatment of dependents with severe disability under Section 80DD up from Rs 75,000 to Rs 1,00,000.

Impact:

The taxpayer would be able to claim a higher deduction of Rs 1,00,000 from his taxable income (irrespective of the amount spent), if he has incurred any expenditure for medical treatment of such dependents or has deposited any sum with prescribed insurance companies.

Proposal:

Investments under the New Pension Scheme (NPS) is also proposed to be covered for deduction from taxable income under Section 80CCD, within the overall limit of Rs 1,00,000.

Impact:

This will also enable selfemployed persons to contribute to the NPS and opens another avenue for investments available for taxpayers. However, the overall cap for investments remains the same. Further, re-investments during the year (ie amounts not actually received) into the NPS also qualify for deduction.

Proposal:

Fringe Benefit Tax (FBT) is proposed to be abolished and fringe benefits are proposed to be taxed in the hands of the employees.

Impact:

This will result in benefits presently liable to FBT being taxed as perquisites in the hands of employees. Accordingly, the employer would be required to deduct tax on such fringe benefits from the employee’s salary, and not pay FBT on the same. The taxable fringe benefits and the valuation mechanism in respect of the stock incentive schemes are expected to be notified in due course.

Proposal:

Definition of higher education for the purpose of deduction of interest on loans borrowed under Section 80E substituted now includes studies in any field (including vocational fields) pursued immediately after schooling.

Impact:

While the present provision covered only specified fields of study (graduate or PG courses in engineering, medicine, etc), the extended scope would enable larger number of taxpayers to avail deduction for interest on loans borrowed for pursuing studies even after schooling (Standard X).

Proposal:

Individuals/ HUFs receiving property (whether immovable or not) exceeding Rs 50,000 in value after October 1, 2009 without any consideration or with inadequate consideration are proposed to be taxed, except when received from relative or on marriage, under will/inheritance, etc.

Impact:

Now all gifts-in-kind would also be liable to income-tax in hands of the recipient. The value to be considered for immovable property is the value as per prevailing stamp duty laws and for other properties, the fair market value would be considered. Even if the transfer document for the immovable property is not registered with a stamp valuation authority, the value assessable for the purpose of payment of stamp duty would need to be considered.