Exemption up but tax will rise for most

Budget 2007 has increased the basic income tax exemption limit by Rs 10,000. For individual assesses, it is now Rs 1.1 lakh, though for women assesses

Budget 2007 has increased the basic income tax exemption limit by Rs 10,000. For individual assesses, it is now Rs 1.1 lakh, though for women assesses, it is Rs 1.45 lakh and for senior citizens Rs 1.95 lakh. As a consequence, the total relief will be Rs 1,000 for women and men assesses, and Rs 2,000 for senior citizens.

However, what Chidambaram has given by way of exemptions, he’s taken by way of a new higher education cess of 1 per cent, which takes the total cess to 3 per cent. For higher income groups — earning a salary of Rs 6 lakh per annum or more — this might translate into a marginally higher amount shelled out by way of taxes. This is largely due to the fact that as the income increases the percentage increase of the cess has a magnifying effect vis-a-vis a standard relief of Rs 1,000 (See table: How much tax will you pay?)

Illustratively for an individual whose annual salary is Rs 3 lakh, the difference in his taxes is Rs 630, but an individual whose salary is Rs 7 lakh has to shell out Rs 570 more in the new system. Another change has been in the hike in the withdrawal limit of the Banking Cash Transaction Tax . The exemption has been raised from Rs 25,000 to Rs 50,000 for individuals and HUFs. Now, on withdrawal from one’s current account or fixed deposit exceeding Rs 50,000 in a day, a tax of 0.1 per cent will be levied on the entire withdrawal.

How much tax you will pay

Cess has gone up to 3 per cent and the basic exemption limit has risen by Rs 10,000. The table shows the change in tax, assuming no deductions are claimed.

Income New Old Change

3 lakh 40170 40800 630

4 lakh 71070 71400 330

5 lakh 101970 102000 303

6 lakh 132870 132600 -270

7 lakh 163770 163200 -570

Figures in Rs

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