TMI BlogBUDGET 2010: Request to increase threshold exemption in view of high inflation to provide relief to lower middle class.X X X X Extracts X X X X X X X X Extracts X X X X ..... BUDGET 2010: Request to increase threshold exemption in view of high inflation to provide relief to lower middle class. - By: - C.A. DEV KUMAR KOTHARI - Income Tax - Dated:- 7-3-2010 - - The Finance Minister, Shri Pranab Mukherjee on 26 th February 2010 announced long awaited tax concessions for individual tax payers. The reduction of slabs is aimed to simplifications and ease in understanding. On the basic threshold there is some relief only for female tax payers by increasing exemption from 160K to190 K and there is no change for male taxpayers as well as for senior citizens. Important changes is in the first tax rate slabs for men, women and senior citizens the second slab is proposed to from Rs 5 lakh to Rs 8 lakh. The FM has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o increased the investment based deduction by Rs.20000 through new section 80CCF for infrastructure bonds only for one year namely AY 2011-12 (PYE 31.03.2011). This will not be a regular feature like section 80C . Substantial upward revision is over due: We find that threshold exemption was Rs.150 lakh for AY 2009-10 and it was revised just by Rs.10000 to Rs.160000 for AY 2010-11 (current PY to end on 31.03.2011). the increase in last budget was miniscule and much more was desirable. Therefore, it can be said that a substantial upward revision is over due. Inflation: Inflation has been major concern of government. For the people in lower middle income group (say up to Rs. 25000 per month) inflation has created havocs. Furthermor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in view of changed times requirements have also increased. Therefore, lower middle class is very badly affected lot and they need reprieve by leaving them from tax net, at least for direct taxes. All class of peoples pay indirect taxes: Indirect taxes are being paid by all class of people on goods consumed and services availed. Therefore, it should not be a reason that some income-tax must be paid even by lower middle class. Suppose a person spends about Rs.10000 per month and Rs. 120000 per annum. On an average he bear indirect taxes of Rs. 400 per month and Rs. 4800/-( Roughly estimating about 50% of expenses as liable to indirect taxes at average rate of 8%). Therefore burdening them with direct tax is not desirable. People i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n lower middle class and inflation: Analysis of tax savings from tax proposals is given in tables hereafter. We notice that there is no saving at all for income up to Rs. two lakh for any type of person. An income of Rs.Two lakh per year can roughly be said to belong to any persons having monthly income of Rs.15000/- + bonus and other income of Rs.20000/-. These people have been worst hit by inflation. Furthermore from the new session of schools and colleges, in most of educational institutions fees is likely to be raised from April 2010. It is desirable to reduce burden of tax and its compliance and to make available more time to people in lower income group, so that they can make more efforts to learn and earn more and try to provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e good education to children. Therefore they must be allowed freedom from taxation. An average monthly income of Rs.20000 should be fully exempted therefore, basic threshold limit should have been raised to Rs.250000/- Impact of revision in rate and slabs are analyzed below: A.for male tax payers not being senior citizens: Slabs (Rs) Rate 0 - 160000 0 160001 - 500000 10 500001 - 800000 20 800001 and above 30 Old tax slabs: Slabs (Rs) Rate 0 - 160000 0 160001 - 300000 10 300001 - 500000 20 500001 and above 30 Impact: Taxable income (Rs) Tax -before bud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... get Tax after budget Difference (Rs) (Rs) (Rs) 200000 4120 4120 0 500000 55620 35019 20601 1000000 210120 158619 51501 1200000 271919 220419 51500 1500000 364619 313119 51500 2000000 519119 467619 51500 2500000 673619 622119 51500 4000000 1137119 1085619 51500 Average rate of tax on income of 5,10 and 20 lakh rupees comes to 7.02%,15.86% and 23.38% B. for Female taxpayer not being senior citizen New tax slabs: Slabs (Rs) Rate 0 - 190000 0 190001 - 500000 10 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0001 - 800000 20 800001 and above 30 Old tax slabs: Slabs (Rs) Rate 0 - 160000 0 160001 - 300000 10 300001 - 500000 20 500001 and above 30 Impact: Taxable income (Rs) Tax -before budget Tax after budget Saving (Rs) (Rs) (Rs) 200000 1029 1029 0 500000 52529 31929 20600 1000000 207029 155529 51500 1200000 268829 217329 51500 1500000 361529 310029 51500 2000000 516029 464529 51500 2500000 670529 619029 51500 40000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 1134029 1082529 51500 Average rate of tax on income of 5,10 and 20 lakh rupees comes to 6.38%,15.55% and 23.22% For Senior Citizens - males and females both New tax slabs: Slabs (Rs) Rate 0 - 240000 0 160001 - 500000 10 500001 - 800000 20 800001 and above 30 Old tax slabs: Slabs (Rs) Rate 0 - 240000 0 160001 - 300000 10 300001 - 500000 20 500001 and above 30 Impact: Taxable income (Rs) Tax before budget Tax after budget Saving (Rs) (Rs) (Rs) 200000 0 0 0 500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47379 26000 21379 1000000 201879 150379 51500 1200000 263679 212179 51500 1500000 356379 304879 51500 2000000 510879 459379 51500 2500000 665379 613879 51500 4000000 1128879 1077379 51500 Average new rate of tax on income of 5,10 and 20 lakh rupees comes to 5.20%,15.04% and 22.96% - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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