Financial Daily from THE HINDU group of publications
Saturday, Mar 01, 2003
Industry & Economy
Jaswant leaves more money in salaried pocket
NEW DELHI, Feb. 28
IN a move that will raise the spirits of the salaried employees, the Finance Minister, Mr Jaswant Singh, today raised the standard deduction limit and did away with the five per cent surcharge levied on individuals with salaries of over Rs 1,50,000.
While retaining the existing rate structure, Budget 2003 has proposed raising the standard deduction for salaried employees to 40 per cent or Rs 30,000 whichever is less for income up to Rs 5 lakh and Rs 20,000 for salary income of over Rs 5 lakh.
The Minister has also dispensed with the five per cent surcharge for a major chunk of the tax paying population. Only, persons with salaries of over Rs 8.5 lakh will now have to pay a 10 per cent surcharge. Besides this, the general deduction for incomes from dividends, interest has been raised to Rs 12,000 from Rs 9,000 and an additional Rs 3,000 for interest from Government securities taking the total deduction under Section 80 L to Rs 15,000.
Going by these proposals, Mr Singh has rejected some of the significant recommendations for personal tax made by the Kelkar committee. For instance, the committee had suggested that standard deduction for salaried employees be eliminated.
The Finance Ministry has, in fact, raised the standard deduction limit. Other recommendations such as replacing the three-slab structure with two slabs and doing away with rebate schemes under Section 88 for savings schemes and Section 80L for interest income and dividends have not seen the light of day.
Among the other benefits offered to the individual tax payer, expenses up to Rs 12,000 per child for two children have been made eligible for tax rebate under Section 88 of the Income-Tax Act.
Voluntary retirement scheme (VRS) payments up to Rs 5 lakh have been exempted even when taken in instalments.
Tax rebate to senior citizens has also been raised to Rs 20,000 from the existing Rs 15,000. As a result a senior citizen having an income up to Rs 1.53 lakh would now become exempt from income tax. In the case of senior citizens, on pension the effective exemption limit would become Rs 1.83 lakh due to a standard deduction of Rs 30,000.
Physically handicapped or persons with such dependents are also entitled a deduction for permanent physical disability of Rs 50,000 and an enhanced deduction of Rs 75,000 in case of severe disability.
The Budget has also modified the definition of not ordinarily resident who is not taxed on their foreign income. According to the new definition, the tax benefits would be available to persons for two years if they remain non-resident for the last nine out of 10 years.
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