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With a clear indication from the Finance Minister that the much awaited Direct Taxes Code (DTC) will be rolled out from April 1, 2012, Budget 2011 will hopefully be the last one of its kind that proposed amendments to the current Income-Tax Act, 1961.
In the Budget speech, the Finance Minister (FM) said: “At times the biggest reforms are not the ones that make headline, but the ones concerned with the details of governance, which affect the everyday life of aam admi. In preparing this years' Budget, I have been deeply conscious of this fact.”
Let's have a look as to whether Budget 2011 is really for ‘aam aadmi', as was indicated by the Finance Minister before announcing his tax proposals.
Key Budget proposals
At the outset, with the clear intent of doing expectation management of the masses as well as of Corporate India, the Finance Minister indicated in his speech that as the Government policy on direct taxes was outlined in the DTC, the Budget proposals have been limited only to initiatives that require urgent attention.
With a view to marry provisions of the DTC and the Act, the basic exemption limit for Individuals, other than resident women, has been proposed to be marginally increased from Rs 160,000 to Rs 180,000. Surprisingly, no upward revision in the basic exemption limit for women tax payers has been proposed.
This would result in a marginal tax benefit of Rs 2,060 to male taxpayers.
At what age is an individual considered a senior citizen for tax purposes?
Varied laws have specified different age for the senior citizen benefits. Most of the Government department determine the retirement age as 60. It is in this backdrop that the Finance Minister seems to have proposed to reduce the senior citizen age specification to 60, as against the current specified age of 65 for income-tax purposes.
The basic exemption limit for senior citizens is also proposed to be increased marginally by Rs 10,000 to settle at Rs 250,000 and would be available to an individual once he celebrates his 60{+t}{+h} birthday.
It seems like the Finance Minister indeed believes that old is gold and hence, senior citizens got a special attention in Budget proposals. An individual aged 80 or more will now be categorised as a very senior citizen — a privileged class of taxpayers. The basic exemption limit for a very senior citizen is set as Rs 500,000.
In order to promote savings and raise funds, additional deduction to the extent of Rs 20,000 under section 80CCF was introduced by Finance Act-2010. The benefits are proposed to be extended to FY 2011-12 as well.
Improving Governance
To have an efficient tax administration through a robust IT infrastructure, the Finance Minister announced that two new Central Processing Centres would be operational by May 2011 in Manesar and Pune.
The Finance Minister has also indicated that CBDT will notify a Web-based facility to enable a direct, stand-alone interface for tax payers so that they can report and track resolution of their refunds and credit of prepaid taxes.
To allow small taxpayers to do away with the compliance requirement of filing the return of income, the Finance Minister has announced that the CBDT will notify a category of salaried taxpayers who will not be required to file a return of income, if the tax liability has been discharged by the employer through deduction at source.
Branded garments may now become heavier for pocket. A proposal has been made to extend the service tax levy to accommodation at a hotel with declared tariff in excess of Rs 1,000 a day and on services provided by air-conditioned restaurants.
Air travel will now become more expensive, with the proposed levy of service tax at the standard rate of 10 per cent on domestic travel by higher class.
Are you a professional? It's time to cheer: It is proposed to exempt all individual and sole proprietors with a turnover of Rs 60 lakh from the formalities of service tax audit.
After an analysis of the Budget, one can probably contend that not much has come by way of goodies on the individual's plate. The Budget may not have made the young assessees as thrilled as probably it has the pensioners and the venerable Very Senior Citizens in our society.
(The author is Executive Director – Tax & Regulatory Services, PwC India. With inputs from Basant Porwal and Komal Kotecha.)
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