PERSONAL TAXATION IN BUDGET 2012.

Union Budget 2012-13 is now in public domain and all of us are affected- directly or indirectly as there are major amendments in direct taxes as well as indirect taxes. While some relief is proposed in personal income tax which will benefit all individual tax payers, particularly in first two slabs, each one of us will be hit by service tax as almost  all services we consume shall now cost more, be it eating out in a restaurant or holidays or even a hair treatment in a parlour.

In personal income tax, while senior citizens and women do not get any extra privilege this time, the income tax slabs have been made more tax payer friendly by providing a marginal relief of Rs 20000 in first slab and Rs two lakh in second slab. In the next year, there will be no income tax up to Rs 2 lakh of total income. Income in Rs 2 lakh- 5 lakh slab will be taxed @ 10 percent and income in Rs 5 lakh-10 lakh bracket will be taxed @ 20 percent, which was hitherto upto Rs 8 lakh only. Thus, taxpayers who fall in the bracket of Rs 8 lakh to 10 lakh will benefit @ 10 percent on account of tax rate differential which at best could be Rs 20000. Income above Rs 10 lakh would be taxed @ 30 percent .   Therefore, maximum benefit would accrue to those who fall in second or third slab. In case of senior citizens, tax rates/ slabs remain the same with the difference that first Rs 2.50 lakh are tax exempt. Also, for all purposes, age of senior citizens has been harmonized to 60 years and special slab rates in case of very senior citizens of 80 years and above shall continue.

In case of individuals, exemption on saving bank interest up to Rs 10000 has been provided as it used to be a decade back . But this would now provide relief only to small taxpayers who are having salary income of less than Rs 5 lakh as there would also be no need to file tax return. There is also a proposal to allow deduction of upto Rs 5000 for preventive health cheek up but this is a misnomer as it is not a new deduction but only under existing deduction u/s 80D of medical insurance.

For investors, investment in a proposed new Rajiv Gandhi Equity Scheme (to be announced), an investment of up to Rs 50000 will allow a deduction of 50 percent but it comes with a lock-in of three years. It is felt that this could be a risky proposition for small investors. Instead of this, the period of investment in infrastructure bonds could have been extended. Since it is not there, investments, in infrastructure bonds will not provide any tax relief hence forth .

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