BUDGET IMPACT ON INCOME TAX - F Y 2012-13

Proposal: The basic threshold limit for income-tax has been revised upwards marginally for individual taxpayers (except senior citizens) from Rs 1,80,000 to Rs 2,00,000.

Impact: This will result in a tax savings for Rs 2,060 (Rs 1,030 for women) across the board. Those having taxable income up to Rs 2,00,000 are out of income-tax ambit.

Proposal: While the tax slab rates (10% /20%/ 30%) remain the same, the trigger for the top tax slab (30%) has been raised from Rs 8,00,000 to Rs 10,00,000.

Impact: This will result in a tax saving of upto Rs 20,600 (in addition to Rs 1,030/ Rs 2,030) for persons having income above Rs 8,00,000.

Proposal: Senior citizens are no longer required to pay advance tax, if they are not running any business/ profession.

Impact: This will help reduce the compliance burden for senior citizens. However, they will need to pay their taxes before filing the annual return of income.

Proposal: A deduction of upto Rs 10,000 for interest from savings bank accounts is proposed while computing taxable income.

Impact: This will save tax of upto Rs 3,090 on savings bank interest income. If taxable salary income is up to Rs 5,00,000 and interest from savings bank accounts is up to Rs 10,000, no tax return is to be filed.

Proposal: An additional avenue of Rs 5,000 is also available to cover expenses for preventive health check-ups for self and family members within the overall limit of Rs 15,000 for Mediclaim insurance premium.

Impact: This will allow taxpayers to recover some part of such expenses and encourage them to keep a tab on their health.

Proposal: Capital gains from sale of house property will not be taxable, if invested in equity shares of eligible companies (typically SMEs).

Impact: An additional avenue is now available to save tax on capital gains. This will also channelize funds to the small and medium enterprise (SME) sector.

Proposal: Additional deduction for infrastructure bonds of Rs 20,000 has not been extended beyond assessment year 2012-13 .

Impact: Such bonds will lose their attractiveness.

Proposal: Securities Transaction Tax (' STT' ) reduced on delivery based equity transactions by 20% from 0.125% to 0.1%.

Impact: This will reduce the transaction cost of purchasing/ selling shares in the secondary market/ stock exchanges and give a fillip to the capital market.

Proposal: Tax benefits (deduction for premium or exemption for maturity proceeds) are no longer available to new life insurance policies having annual premiums of more than 10% of sum assured (this does not take into account the loyalty bonus component).

Impact: New life insurance policies will not carry tax benefits any longer if premiums are more than 10% (presently 20%) of actual assured amount. The present life insurance policies thankfully will not be impacted by this change.

Proposal: Seller of immovable property with value exceeding Rs 5,000,000 for urban areas (Rs 2,000,000 for rural areas) will need to deduct tax at source @ 1% of the sale value, and pay it to the government treasury.

Impact: While this will help in tracking/ bringing to tax the transactions in real estate sector generally, there would be an additional compliance burden to be undertaken by the seller.

Proposal: Additional tax of 1% will be collected at source from the buyer on cash purchases of jewellery, bullion, etc, if value exceeds Rs 2,00,000.

Proposal: While this is intended to track the cash transactions in the jewellery/ bullion market, additional tax levy would increase the cost of the purchase and create an administrative burden for the seller.

Sources from Budget News 2012