Industry & Economy
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Income Tax
Personal income-tax structure overhauled — Advantage lower, middle income groups
Our Bureau
New Delhi
,
Feb. 28
LOWER and middle income groups are likely to gain from the major personal income-tax structure overhaul proposed by the Finance Minister, Mr P. Chidambaram, through the Finance Bill 2005.
Besides altering the tax brackets, the Finance Minister has also proposed new rates for different slabs under the proposed structure. For taxable income up to Rs 1 lakh, the income-tax rate has been prescribed as nil. For taxable income between Rs 1-1.5 lakh, it would be 10 per cent. For taxable income between Rs 1.5-2.5 lakh, it has been set at 20 per cent. As regards taxable income beyond Rs 2.5 lakh, the applicable rate is 30 per cent.
Further, the level at which the surcharge of 10 per cent would apply has been raised to Rs 10 lakh taxable income. Taxpayers in every tax bracket would gain from this proposal.
The Finance Minister has also fixed the threshold exemption level for women at Rs 1.25 lakh and the exemption level for senior citizens at Rs 1.5 lakh.
In addition to the exemption limits, every taxpayer is to be allowed a consolidated limit of Rs 1 lakh for savings, which will be deducted from the income before tax is calculated.
The Finance Minister also announced that the standard deduction would be removed. The rebate under Section 88 is proposed to be eliminated and Section 80L is being omitted to reflect the new regime.
In addition to the consolidated limit of Rs 1 lakh, the six deductions on interest paid on housing loan for self-occupied house property, medical insurance premia, specified expenditure on disabled dependent, expenses for medical treatment for self or dependent or member of a HUF, deduction in respect of interest on loans for pursuing higher studies and deduction to a person with disability would continue to receive the same tax treatment as it exists today.
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