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Journalism of Courage
The tax burden on the middle class is down. Not only are the threshold levels higher, the deductions are allowed across the board to all income categories. We did some numbers that took into account some major deductions and rebates that people took to calculate the tax paid. Before the Budget, we assumed that you would avail of the standard deduction, the deduction on the notified pension plans (Rs 10,000) and mediclaim (Rs 10,000), and then maximise the rebates on the tax liability (Rs 20,000 and Rs 15,000). After the Budget, we assume that you will save Rs 1 lakh in the specified products to get this deduction from your total income and then another Rs 10,000 deduction for the mediclaim. The numbers we got were heartening — Indian middle class is paying less tax than before with considerably less confusion. Standard deduction, deductions and rebates each had ceilings on products and on categories making it a very complicated tax system. With one stroke the Finance Minister has swept away the confusion and left the choice of products and limits to the individual. You can still use the old products like PPF or NSC or a pension product, but are no longer restricted by the Rs 70,000 limit on PPF or the Rs 10,000 limit on a pension product to get the tax benefit. And you pay lower average taxes!
Deepak Jham
AGE: 34 yrs
Yoga instructor Deepak and wife, Seema, along with daughter Tarushi and 3-month old Arjav, look forward to more disposable income in the year ahead. Deepak has moved to a lower tax bracket. “I plan to save the money I save in taxes this year,” says Deepak. He plans to continue with his PPF and bond investments.
Income between Rs 1.5 and 3 lakh
TAX SLAB (before the budget): 30.6%
TAX SLAB (after the budget): 20.4%
REBATE SLAB (before the budget): 15%
REBATE SLAB (after the budget): 0
REBATE AVAILED (before the budget): Maximum
REBATE AVAILED (after the budget): 0
Product (before the budget): Insurance, PPF, NSC, Bonds
Those earning Rs 3 lakh would have paid about Rs 35,000 tax, after taking Rs 1.2 lakh of rebates and deductions. Today he pays about Rs 13,000 as tax.
Rakesh Gupta
AGE: 29 yrs
Insurance executive Rakesh Gupta is happy to be in a lower tax bracket after the budget. “The middle class has been taken care of,” he says. Wife Shelly, who was already in the zero tax bracket, does not miss the removal of the Section 88 benefit to women since she is more than compensated by the the increase in the threshold level of zero tax income to Rs 1.25 lakh for women.
Income between Rs 3 and 5 lakh
TAX SLAB (before the budget): 30.6%
TAX SLAB (after the budget): 20.4%
REBATE SLAB (before the budget): 15%
REBATE SLAB (after the budget): 0
REBATE AVAILED (before the budget): Maximum
REBATE AVAILED (after the budget): 0
Product (before the budget): PPF, Home principal, LIC
Product (after the budget): 0
A person earning a gross income of Rs 5 lakh would have paid about Rs 96,000 tax before the budget. Now he pays about Rs 68,000.
Jagdish Hiremath
Age 74
Jagdish Hiremath ,74 and wife Oonita, 69 are happy with the Budget. A retired government official, Hiremath now lives off his pension and some other investment income. “I find a substantial different in the tax I pay. I cannot complain,” he says. Senior citizens have lost the Rs 15,000 tax rebate, but get Rs 1.5 lakh of their income as tax free. If they can save another Rs 1.1 lakh in specific products, the taxable income drops even more. Add higher tax slabs and there is cause for joy.
Life After 60 looks good
TAX SLAB (before the budget): 30.6%
TAX SLAB (after the budget): 20.4%
REBATE SLAB (before the budget): 15%
REBATE SLAB (after the budget): 0
Products used (before the budget): Infrastructure bonds
Products used (after the budget): 0
88b rebate on tax for senior citizen (before the budget): 20,000
88b rebate on tax for senior citizen (after the budget): 0
A senior citizen who earns up to Rs 2.6 lakh gross income pays zero tax, earlier he was tax free till a threshold of Rs 2.2 lakh
Sunirmal Ghosh
AGE: 49 yrs
Entrepreneurs in the service sector, Surnirmal and Meeta Ghosh are upset about the 0.1% tax on cash over Rs 10,000. Ghosh is, however, happy about his status as an individual tax payer. “I was earlier not eligible for the Section 88 rebate, this Budget puts at par with other tax payers with the Rs 1 lakh deduction.”
Income above Rs 8.5 lakh
TAX SLAB (before the budget): 30.6%
TAX SLAB (after the budget): Same bracket but pays less tax
REBATE SLAB (before the budget): 0
REBATE SLAB (after the budget): 0
A person earning Rs 10 lakh would have earlier paid about Rs 3 lakh tax, now he pays Rs 2.2 lakh
