V. K. Subramani
The Finance Minister, Mr P. Chidambaram, took only 30 minutes to spell out the tax proposals for fiscal 2006-07.
Prima faciethere does not seem to be any major relief for the individual taxpayer, but on going through the Finance Bill, 2006, the following positives to various classes of taxpayers could be identified:
In additionto there being no fresh tax burden on the salaried class, incentive by way of deduction towards term deposits of five years or more in scheduled banks would be eligible for deduction under Section 80 C. Self-employed can claim this deduction without having to invest in insurance or other incentive avenues contained in the provision.
The contribution topension funds eligible for deduction has been enhanced from Rs 10,000 under Section 80 CCC to Rs 1 lakh. However, there is no corresponding incentive by amending or deleting Section 80 CCE, which provides an overall cap of Rs 1 lakh as deduction in aggregate under Sections 80C, 80CCC and 80 CCD.
Contribution ofthe employer to superannuation fund up to Rs 1 lakh per employee is not liable for fringe benefit tax. Hence, employees have to seek benefits by way of contribution to superannuation fund which are not taxable in their hands and also not liable for FBT for the employer.
Economic criteriafor filing of return of income, popularly known as the one-by-six scheme, stands abolished. Hence, for the previous year ending March 31, 2006, such return need not be filed by persons who have income below the taxable limit.
Wholly religioustrusts or institutions, even if they receive anonymous donations, would continue to be exempt from tax. In contrast, other charitable trusts and institutions have to pay tax at 30 per cent on anonymous donations.
(The author is an Erode-based chartered accountant.)