Gains trickle in,but a lot to lose in benefits

A salaried male individual below 60 years and earning R10 lakh a year can now save up to R22,660 a year in taxes.

A salaried male individual below 60 years and earning R10 lakh a year can now save up to R22,660 a year in taxes. A female individual in the same age group and income level can save as much as R21,630 a year.

This,thanks to finance minister Pranab Mukherjee increasing the basic exemption limit from the current R1.8 lakh to R2 lakh and liberalising the slabs.

Similarly,male and female individuals up to 60 years and earning less than R8 lakh a year will save R2,060 and R1,030,respectively,in taxes. However,the exemption limit for senior citizens remains unchanged at R2.5 lakh.

The interest income from savings bank and post office savings accounts up to R10,000 is proposed to be exempt from tax. This means an additional annual tax saving of R3,090 from savings bank interest up to R10,000.

Also,as part of the overall limit of R15,000 for deduction of health insurance premium for self,spouse and children under Section 80D of the Income Tax,1961,a deduction of up to R5,000 is proposed for preventive medical check-ups. This means,an additional tax saving of R1,545 per year.

Life insurance policies issued after April 1,2012,will enjoy deduction on payment of premium and exemption on maturity only if the premium payable in any year is less than 10% of the sum assured.

Analysts say that there will be a tax loss to individuals of up to R6,180 on account of the withdrawal of deduction available on investment in long-term infrastructure bonds up to R20,000 under Section 80CCF.

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To encourage people to save in the equity market,the government has launched a new scheme the Rajiv Gandhi Equity Saving Scheme to allow income-tax deduction of 50% to new retail investors,who invest up to R50,000 directly in equities and whose annual income is below R10 lakh. The scheme will have a lock-in period of three years.

Also,to collect tax at the earliest point of time and have a reporting mechanism of real estate transaction,it is proposed that the transferee of an immovable property (other than agricultural land) would need to deduct tax at source at 1%,if the amount for the transfer of such a property exceeds R50 lakh or if the property is situated in a specified urban area,or R20 lakh if it is located in any other area.

So,while all of the above measures seem to bring savings for the aam aadmi and increased their disposable income,the net impact may well be neutral with the broadening of the service tax net and increasing the rate from 10% to 12%,which will push up the prices of services.