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Income tax: What to expect in the Budget
The salaried class and small businesses are more affected by rules related to income tax than the rules related to indirect taxes like sales tax and excise duty.
Expectations are very high for these people on what the forthcoming budget will have to offer for them.
Here are some of the things that we could expect form the Budget 2010 on personal income tax: Click NEXT to read further. . .
Income tax: What to expect in the Budget
Limits for taxable income
There is a possibility that the slabs for personal income tax may be increased. The current slab of Rs 1.6 lakh (Rs 160,000) for taxable income may be increase to Rs 2.5 lakh (Rs 250,000) for men. There will be suitable increments to women and senior citizens. Income above this slab is taxed at 10% till the next slab.
The second slab may be increase to Rs 10 lakh (Rs 1 million) from the current Rs 3 lakh (Rs 300,000) for the taxation at 20%.
The third slab is expected to be raised to Rs 25 lakh (Rs 2.5 million) for the 30% tax rate. This is from an existing slab of Rs 5 lakh (Rs 500,000). The highest slab is expected to occur at Rs 50 lakh (Rs 5 million). This is an increase from the current slab of Rs 10 lakh. Click NEXT to read further. . .
Income tax: What to expect in the Budget
Increase in Gratuity Limit
Already given the go ahead by a group of Ministers, the gratuity limit at the time of retirement may be increased to Rs 10 lakh from the current Rs 3.5 lakh (Rs 350,000). This is definitely less than the 'No Upper Limit', requested by the salaried class. But the increase in limit is much better than the archaic Rs 3.5 lakh.
This is definitely a blessing for people who are retiring. Many a times, with the higher income that the Central and State government employees enjoy, at the time of retirement, people are not getting the full amount that has accrued in their gratuity account.
Decrease in tax rates
The new Direct Tax Code under discussion proposes to limit the highest taxable rate. If implemented the highest tax slab discussed in the first point above will be reduced to 25% only from 30%. Click NEXT to read further. . .
Income tax: What to expect in the Budget
Increase in self assessment slab
The self assessment slab is currently at Rs 40 lakh (Rs 4 million) for professionals and business people. This slab may be increased to Rs 1 crore (Rs 10 million). This will help to reduce the accounting burden for the self employed and professionals.
PAN card linkage
The PAN (Personal Assessment Number) card is currently the prime card required for any financial transaction.
However, there are a number of missing links in the implementation. For example, bank deposits in different banks (private and public sector banks and cooperative banks) are not linked. This has been used (misused) by tax payers and tax evaders by having a number of accounts in different banks to avoid tax on interest.
The same is happening with mutual funds with different folio numbers to avoid getting a KYC (Know Your Client) certification.
Making a PAN card mandatory has not been enough. The accounts also need to be integrated based on the PAN card.
The forthcoming budget may make this implementation mandatory. More than any other change in the income tax, this will be the biggest change, if implemented, as it is a disruptive change compared to the other marginal changes. Click NEXT to read further. . .
Income tax: What to expect in the Budget
Income tax reforms objectives & progress
Overall the reforms related to income tax are to simplify the process of paying/collecting taxes, to expand the tax payers base so that the burden of tax is reduced and spread over many.
The direction taken by the authorities is on the right track however the speed till now is slow. The expectation from the forthcoming budget based on the pre-budget discussion is that there may be a few block buster changes.
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