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The TRUE impact of Budget on your tax, money!
The Union Budget 201-12 does not have too many radical proposals and it seeks to strike a balance between growth and populism with its proclaimed intent to bring down the fiscal deficit. Overall, it can be said to be a budget for the long-term investor.
In the following analysis, RelaxwithTax has tried to squeeze out the useful information -- from the Budget Speech delivered by Finance Minister Pranab Mukherjee -- that is relevant to you in terms of personal taxation and finance.
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The author is principal advisor, direct tax group, RelaxwithTax Consultants Pvt Ltd. RelaxwithTax is a Mumbai-based personal tax & finance solutions provider offering a wide range of services.
The TRUE impact of Budget on your tax, money!
But first, a snapshot
1. Finance minister seems to tell the taxpayer 'Keep the change': Income Tax slab increased (though a very small increase) for Resident Males, Non-Residents and Senior Citizens.
2. FM seemingly sings 'Dil toh Bachha hai ji': Qualifying age limit for Senior Citizen, lowered from 65 years to 60 years.
3. FM's gift to the 'young at heart': Provision of higher exemption limit for very senior citizen's of 80 years or more.
4. FM aims at 'equality for women': No new tax exemptions for women.
5. FM 'means business': New Central Processing Centres to be set up for faster processing of income tax returns and refunds.
6. FM says Khana phir Rona: Air-conditioned hotel accommodation and restaurants to attract levy service tax.
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The TRUE impact of Budget on your tax, money!
7. FM's taxes fly high: Domestic and international air travel to attract flat amount of service tax. Additionally, higher class travel in the domestic sector to attract 10 per cent service tax.
8. FM's 'bitter pill': Hospitals with 25 beds or more with central air-conditioning to levy service tax on all patients. Diagnostic test centres also to levy service tax.
9. FM believes 'Taxes, life ke saath bhi aur bhaad bhi': Services provided by life insurance companies in the area of investments also to be covered under the levy of service tax.
10. FM's Sugam, hopefully will be good: New simplified Income Tax return form 'Sugam' to be introduced for small businessmen.
11. FM, a little less "Dabaang": Relief from audit for small service taxpayers with turnover lower than Rs 60 lakh (Rs 6 million).
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The TRUE impact of Budget on your tax, money!
How does the Budget 2011 impact you
Understand how the budget proposals impact your finances directly / indirectly.
Increase in exempt income slab
| Category | Existing Zero Tax Slab (Rs) | Proposed Zero Tax Slab (Rs) | Tax Savings (Rs) |
| Resident Men | 160,000 | 180,000 | 2,060 |
| Non-Residents | 160,000 | 180,000 | 2,060 |
| Senior Citizens (age over 60 but less than 80) | 240,000 | 250,000 | 1,030 |
| Senior Citizens (age 80) | 240,000 | 250,000 | 26,780 |
| Resident Women | 190,000 | 190,000 | Nil |
Impact Analysis
The enhanced slab for exemption seems to be only token and would not greatly impact the reduction of the tax bill for resident male, Non-Resident Indians and senior citizens below the age of 80.
This token increase has however eluded the women folk with no enhancements coming their way.
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The TRUE impact of Budget on your tax, money!
Lowered qualifying age criteria
A major relief coming the way of Senior Citizens is the lowering of the qualifying age to 60 years from the earlier 65 years.
Impact Analysis
Senior Citizen need not wait for 5 years post retirement to attain the special status of 'Senior Citizen' in tax parlance.
With this change, senior citizens can plan their income post retirement seamlessly and enjoy lowered tax scenario, once their regular flow of income is stopped.
It is still unclear whether this lowering of age would also be considered for the purpose of availing the enhanced deduction under section 80D for premium paid towards health insurance & 80 DDB for treatment of specified diseases.
The fine print in the proposed bill would need to be checked to ensure availability of the benefit.
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The TRUE impact of Budget on your tax, money!
Special treatment to very senior citizens
The finance minister has introduced a new slab for senior citizens in the age group of over 80 years with an exemption slab of Rs 5 lakh (Rs 500,000).
Impact Analysis
This move would put additional money in the hands of this segment of senior citizens empowering them to lead a comfortable life.
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The TRUE impact of Budget on your tax, money!
Increased scope of Service Tax
With the extension of service tax to the areas of hotels, air travel, hospitals and life insurance companies, the overall cost of entertainment, travel and healthcare would go up thus adversely impacting personal finances.
Impact Analysis
The negative impact that would be borne by individuals is as follows:
| Entity | Effective Rate | Financial Impact |
| Hotel stay (Tariff of Rs 1,000 per day) | 5% | Rs 50 extra per Rs 1,000 |
| Air-conditioned restaurant | 3% | Rs 30 extra per Rs 1,000 |
| Domestic air travel (economy) | NA | Flat tax of Rs 50 |
| Domestic air travel (higher class) | 10% | Rs 100 extra per Rs 1,000 |
| International air travel (economy) | NA | Flat tax of Rs 250 |
| Hospitals (25 beds and central AC) | 5% | Rs 50 extra per Rs 1,000 |
| Diagnostic tests | 5% | Rs 50 extra per Rs 1,000 |