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I AM a senior citizen. I understand that on my annual income of Rs 2 lakh the tax liability would be greater after this Budget. Please confirm whether this is true.

Amba Kishore Jaipuria, Udaipur

Hitherto, senior citizens have been getting a tax rebate up to Rs 20,000. Now this rebate is sought to be replaced with an heightened tax-free exemption limit — Rs 1.5 lakh as against the norm of Rs 1 lakh. That this does not portend anything bad for you can be easily understood.

Earlier, your gross tax liability was Rs 34,000, with the income in excess of Rs 1.5 lakh attracting a tax of 30 per cent. But the rebate of Rs 20,000 under Section 88B brought down your liability to a more agreeable level of Rs 14,000. Now on the same income you would just have to pay a tax of Rs 10,000, with the first Rs 1.5 lakh being exempt from tax. Assuming your income goes up to Rs 3 lakh, still you would be better off under the new regime because under it your tax liability would be only Rs 35,000 whereas had the old regime continued your post-rebate tax liability would be Rs 44,000.

In other words, the withdrawal of rebate has been more than offset by the increase in exemption limit coupled with decrease in the tax rates. What could perhaps rankle the senior citizens is the fact that such reduction in tax liability is no longer their exclusive preserve because this has been done across the board except for the heightened tax-free limit for women and senior citizens. This perception is fuelled when one compares the exclusive benefit for senior citizens under the old regime with the proposed new regime — the earlier one got a rebate of Rs 20,000, now the heightened exemption means a reprieve of only Rs 5,000 given the fact that but for this heightened exemption, the tax liability would have been greater by Rs 5,000. But one should not lose sleep over such trivia.

Deduction vs rebate

IT IS said that the reversion back to the regime of deduction from income instead of rebate for savings would benefit the higher income group more. How?

Sulochana Sampath, Chennai

Yes. This would be for two reasons. Earlier, those with gross total income in excess of Rs 5 lakh were shut off from the tax rebate under Section 88.

But the new Section 80C does not exclude such people. Moreover, the rebate was only 15 per cent for those whose GTI exceeded Rs 1.5 lakh. But it would now be 10 per cent or 20 per cent or 30 per cent according as what the applicable tax rate is for a particular person.

For example if a person's GTI is Rs 4 lakh and he saves Rs 1 lakh under the prescribed avenues, his total income would be Rs 3 lakh. Now what he has saved is a tax of Rs 30,000 (an effective 30 per cent rebate) given the fact that otherwise he would have had to pay a tax of Rs 30,000 on this Rs 1 lakh.

TDS certificate

WILL TDS certificates have still got to be submitted along with the income-tax return as earlier? The last Budget seems to have abolished this requirement.

T. V. Murugesan, Ambattur

Some would say it was an unnecessary show of bravado last year. But the more charitable view is that the Finance Minister perhaps innocently believed in government departments' ability to adhere to deadlines. Either way, tacitly, the Finance Minister has admitted that the computerisation, more particularly the databank efforts of the income-tax department, has not been carried out at the pace it was anticipated. With the result, for the ensuing previous year 2005-06 also one has to assiduously collect the TDS certificates if it runs into thousands, lest credit is denied for non-production of such certificates.

Hopefully, from the next year this would become redundant with the department itself knowing from its databank who has deducted how much from whose income.

Unfair impost

WHY should I pay something for withdrawing from the bank something that is undeniably mine?

Krithika Salwadiswaran, Vilupuram

What has apparently infuriated you as has millions of others is the Budget proposal to impose a 0.1 per cent impost on withdrawals in excess of Rs 10,000 a day.

First, contrary to what the Finance Minister thinks, the move would not have any impact whatsoever on the generation of black money in the country.

He has to dream up something better and imaginative than to tar everyone with the same brush if he is serious about the problem of tackling black money. He has gone on record saying that mindboggling sums like Rs 10-15 lakh are withdrawn by the affluent. An impost of Rs 1,500 on a withdrawal of Rs 15 lakh is not going to deter one from stashing his black money in his bank.

At any rate Mr Chidambaram's belief seems to defy the conventional logic — black money is outside the pale of the banking system. He could have, in the alternative, asked bank managers to notify the income-tax department of huge cash withdrawals so that its sleuths could gun after the delinquents.

His subsequent climb down to consider revising the threshold to Rs 50,000 does not detract from the basic inanity of the scheme.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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