An upper middle class household will have an additional Rs 22,660 at its disposal in the coming year with Finance Minister Pranab Mukherjee introducing in part the personal income tax rates and slabs proposed under the Direct Tax Code.
Personal income tax will kick in only if the annual income of an individual tax payer is Rs 2 lakh or more. The exemption limit hitherto stood at Rs 1.8 lakh a year. Mukherjee also hiked the upper limit of 20 per cent tax bracket from Rs 8 lakh to Rs 10 lakh.
While the exemption limit hike is set to provide a benefit of Rs 2,060 to all individuals with a net taxable income of Rs 2 lakh and above,the widening of the 20 per cent tax bracket from Rs 5-8 lakh earlier to Rs 5-10 lakh now will generate an additional savings of up to Rs 20,600 for all whose net taxable income is in excess of Rs 8 lakh.
So there is more to cheer for the high salaried than for the low income group as an individual with a net taxable income of Rs 10 lakh and above is set to save Rs 22,660 in tax payments against a saving of just Rs 2,060 for those whone net taxable income is below Rs 8 lakh.
The Budget 2012-13 also proposes to offer a little extra saving of Rs 2,575 in a year to new retail investors through investment of Rs 50,000 under the Rajiv Gandhi Equity Savings Scheme. The scheme allows for income tax deduction of 50 per cent to new retail investors,who invest up to Rs 50,000 directly in equities and whose annual income is below Rs 10 lakh. Further,the finance minister has proposed to offer deduction of an aggregate of up to Rs 10,000 for interest from savings bank account under the new proposed section 80TTA.