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Last year, males inched closer to females in the matter of tax exemption limit – Rs 1.80 lakh for males and Rs 1.90 lakh for females. In Budget 2012-13, the finance minister has accepted with alacrity the DTC proposal to bring about gender equality at Rs 2 lakh for both the sexes without rolling in the DTC itself. Vis-à-vis the current exemption limit, the new exemption limit means a tax saving of Rs 2,000 for males and Rs 1,000 for females.
While the rate of tax on income in excess of Rs 2 lakh but not in excess of Rs 5 lakh would be 10 per cent, there is some relief for those who earn in excess of Rs 5 lakh – the rate on income in excess of Rs 5 lakh to Rs 10 lakh (as against Rs 8 lakh now) would be 20 per cent. A special deduction towards insurance premium for preventive health check-up upto Rs 5,000, designed to drive home the importance of annual health check-ups, is not going to enthuse the middle class much, any more than the proposed Rajiv Gandhi Equity Scheme under which all individuals can deduct 50 per cent of their investments in equities in the primary market up to Rs 50,000 from their gross total income subject to the condition that such investments would be locked in for three years. The primary market has been languishing not for want of tax incentives but due to the avarice of corporates in charging mind-boggling premiums.
While there isn't much to crow about on the direct taxes front, further inflation stares a consumer in the face what with both excise and service tax rates going up to 12 per cent from the existing 10 per cent. A welcome reform in the services tax – all services apart from 17 mentioned in the negative list would come in for taxation as against the current dispensation of tax being levied only on notified services – alas would have the effect of pushing up the cost for those availing of the services. The impact of rate hike can be seen immediately. If your telephone bill per month is Rs 1,000, you pay a service tax of Rs 100 on it. Now it would be Rs 120.
The government's effort at discouraging gold imports initiated a few months ago is reflected in the Budget as well – import of refined gold to attract double customs duty, and import of gold and platinum to suffer 4 per cent duty from the extant 2 per cent. And if you import jewellery itself you have to shell out 10 per cent as against the present 5 per cent as customs duty.
(The write is a Delhi-based chartered accountant.)
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