So
the d-day has arrived. The suspense relating to BUDGET 2012 is now out in the
open and the Pandora’s box is has now opened.
Now,
if you google "BUDGET 2012" now, you will get 100s of hits, if not more.
So why should you
visit my BLOG today to read about the Budget?
Because here, I have attempted to
remove all unnecessary info, data etc and the article below is written in a
simple, easy to understand manner keeping the retail Investor’s point of you in
mind.
No
jazzy talk, no extra details, just talking plainly about the couple of things
that matter most to a retail Investor like you and me.
So, what matters to a retail Investor in India?
What does a retail Investor look for in the BUDGET document?
According
to me, the following things matter to a retail Investor?
1.
What
are the New Income Tax Rates
applicable to me the next financial year (FY 2012-13)? Basically, tax kitna
lagega are kitna tax bachha?
2.
What
is the impact on my Investments?
Should I change my tax investments especially under section 80C where I can invest up to Rs. 1 lac and save tax?
3.
What
has changed under section 80D
that deals with Medical Insurance?
A section where up till last year I could pay medical Insurance premium and get
deduction up to Rs.15,000 (Rs. 20,000 in case I am paying premium for parents
who are Senior Citizens)
4.
Any other extra
deduction
that I can avail off and therefore save some Income Tax?
5.
What
about changes in Indirect Tax laws or rates?
6.
Any major legislative
(tax laws) changes
that I need to worry about? For example people were talking about Income Tax
Act 1961 being abolished and replaced with DTC (Direct Tax Code).
7.
So
let me attempt to answer all the above questions one by one?
1.
What are
the New Income Tax Rates applicable to me the next financial year (FY 2012-13)?
Basically, tax kitna lagega are kitna tax bachha?
Ok. Here is the Old
Income Tax slabs (FY 2011-12)
|
Income Tax Slabs for FY 2011-12
(current Financial Year)
|
|
|
Income tax slabs 2011-2012 for
General tax payers
|
|
|
Tax slab (in Rs.)
|
Tax
|
|
0 to 1,80,000*
|
No tax
|
|
1,80,001 to 5,00,000
|
10%
|
|
5,00,001 to 8,00,000
|
20%
|
|
Above 8,00,000
|
30%
|
|
*For Individuals other than Woman
assesses and who are not Senior Citizens
|
|
|
Basic exemption limit for other assesses
|
Rs.
|
|
Women assesses less than 60 years
of age
|
1,90,000
|
|
Senior citizen (60 years to 80 years)
|
2,50,000
|
|
Very Senior citizens ( Age > 80
years)
|
5,00,000
|
And here are The Revised Income Tax Slabs as per Budget
2012 applicable to Individuals for next financial year (FY2012-13):
|
New Income Tax Slabs for FY 2012-13
|
||
|
(Next Financial Year 2012-13)
|
||
|
Income (Rs.)
|
Tax rate
(%) |
Savings (Rs.)
|
|
Up to Rs. 2,00,000* of Income
|
NIL
|
Rs. 2,060
|
|
Rs. 2,00,001 to Rs. 5,00,000
|
10%
|
Rs. 2,060
|
|
Rs. 5,00,001 to Rs. 10,00,000
|
20%
|
Rs. 2,060
|
|
Above Rs. 10,00,000
|
30%
|
Rs. 22,660
|
|
*For Individuals other than Woman
assesses and who are not Senior Citizens
|
||
|
Basic exemption limit for other assesses
|
Income (Rs.)
|
|
|
Women assesses less than 60 years
of age
|
2,00,000
|
|
|
Senior citizen (60 years to 80 years)
|
2,50,000
|
|
|
Very Senior citizens ( Age > 80
years)
|
5,00,000
|
|
|
Source: DNA India
|
||
Comment:
As
you can notice from above, Budget 2012 has given an income tax savings of mere
Rs. 2,060 is available to an Individual male assesses earning income up to Rs.
8 lacs. However, if your income is above Rs. 8 lacs, than your tax savings next
year is Rs. 22,660 approximately.
2.
What is
the impact on my Investments? Should I change my tax investments
especially under section 80C where I can invest up to Rs. 1 lac and save
tax?
The most important
Section under the Income Tax Act to claim tax deduction is Sec 80C wherein you
and I can invest in various instruments and claim tax deduction up to Rs. 1
lac. Well, fortunately or unfortunately, not much has changed under Sec 80C. Neither
the investments avenues have been reduced nor added, barring a small clause on
Insurance plans on which clarifications are awaited. Thankfully, and that GOD for
this, the most profitable investment avenue u/s 80C, Tax Saving Mutual Funds or
ELSS are still going to be there next here. This is the best thing that has
happened according to me…(to know more about Tax Saving Mutual Funds or ELSS,
read my past article titled INVEST and therefore SAVE tax and not vice versa http://niravpanchmatia.blogspot.in/2012/03/invest-and-therefore-save-tax-and-not.html)
3.
What has
changed under section 80D that deals with Medical Insurance? A
section where up till last year I could pay medical Insurance premium and get
deduction up to Rs.15,000 (Rs. 20,000 in case I am paying premium for parents
who are Senior Citizens)
After
you have used section 80C to avail deduction of Rs. 1 lac, the other option is
to use Sec 80D and avail deduction of another Rs. 15,000 to Rs. 20,000 by
paying premium towards Medical Insurance for Self, spouse and 2 children (Rs.
15,000) or parents who are senior citizens (Rs. 20,000). Now senior citizen up
till last year meant citizens above 65 years of age. That definition of senior
citizen has been revised to include citizen above 60 years of age. A good amendment
according to me…
While
the above limits of Rs. 15,000 and 20,000 still hold true, the FM has given an
additional deduction of Rs. 5,000 if you have incurred it “on any payment made
on account of preventive health check-up for yourself or any member of your
family”. Also, a deduction is available even if this check-up cost is paid for
in CASH. A small but necessary change... (I believe this will help you and me
to avail tax deduction on those innumerable medical check-ups that our doctors
make us to do throughout the year).
4.
Any other
extra deduction that I
can avail off and therefore save some Income Tax?
YES. 3 more avenues to
save on Income Tax…
1.
Till
this financial year, even the nominal interest that you and I earned on our
savings bank accounts (@ 4 %) was subject to tax. Going forward, Interest
earned on deposits in Savings Account with Banks, Co-operative Societies and Post
Offices shall not be taxed up till a maximum limit of Rs. 10,000 per annum. This
deduction is available under a new section Sec 80TTA.
However,
the above deduction until Rs. 10,000 is applicable to Individuals & HUFs
only and not to Firms, associations and companies and the deduction is
available for Interest earned on Savings accounts only and not applicable for
Interest earned on Fixed Deposits. (that’s why Debt Mutual Funds give better
income post-tax then Bank FD’s; read my article “The Rich Man’s Bank Accounts” http://niravpanchmatia.blogspot.in/2011/03/rich-mans-bank-accounts.html
)
2.
One
more, more options for tax-free bonds would be available next financial year. Further
clarification awaited.
3.
One
more to go. Yes, one extra Investment avenue has been added but not much
clarity on it available yet. Even the Govt of India and the Finance Minister
wants you to Invest in the Stock Markets. This in order to boost investment in
the equity markets, FM has introduced Rajiv Gandhi Equity Savings scheme. The
scheme allows for Income Tax (I-T) deduction of 50 percent to new retail
investors, who invest up to Rs 50,000 directly in equities and whose annual
income is below Rs 10 lakh. The scheme will have a lock-in period of three
years. The details of the scheme will be announced in due course.
4.
No
Income tax return to be filed for Salary Income below Rs. 500,000; not a deduction but a relief to newly salaried guy...
5.
What about
changes in Indirect Tax laws or rates?
Yes, after good news
comes some bad news. While the FM has given us some avenues to save Income Tax,
he has given us a double whammy by increasing tax rates on Excise as well as
Service tax rates that do not impact us directly but go on to increase prices
of goods and services that we consume and therefore pinched our pocket.
a.
Standard Rates of
Excise duty
(a tax on manufacture of goods that is passed on to you and me and applicable to
most manufactured items) raised to 12%
from 10% earlier.
b.
Service tax rates also
increased from 10% to 12%.
c.
More
important, and this is the double whammy; while currently Service tax is applicable
on selected items and most items were excluded from Service tax; going forward
Service Tax would be applicable on most items barring 17 major categories of items
that would be specified under the negative list…
d.
Import duty increased @4%
on GOLD…so
Gold prices likely to go up…
e.
Excise
duty increased on big cars; therefore they will become costlier
What?
Have you still not had enough? You want more bad news then Google Budget
Highlights and you can read the Summaries provided by other people.
6.
Any major
legislative (tax laws) changes that I need to worry about? For example people were talking
about Income Tax Act 1961 being abolished and replaced with DTC (Direct Tax
Code).
That
is the biggest disappointment from BUDGET 2012. All the hype that FM will finally
deliver and bring in the necessary reform by introducing the Direct Tax Code
(DTC) by replacing the Income Tax Act 1961 and the Goods & Services Tax
(GST) by consolidating various Indirect taxes was a mere hype. The FM , sadly,
failed to deliver miserably on this front. Major Reforms?
There are no reforms in this budget…
To conclude, our beloved Finance Minister today opened his
Budget Speech with this remark,
“I must be cruel to be kind”
Well, what do I say! Our FM is a MAN of his word…He is a thorough gentleman..
Whatever
benefits he has given to the common man under Income Tax, he has taken away
under Indirect taxes by increasing Service Tax and excise duty rates and so on.
But to be fair to our honourable FM, he is currently walking a tight rope after
what happened in the Railway Budget. I just hope that all the major reforms
that he has postponed like bringing in the DTC and GST, he brings sometimes
during the next financial year. If not, join me in praying for this govt.
One Question: What do you do if the FM does not deliver a Budget to your expectations?
ANS.: You tighten your own family budget!!!
HAPPY BUDGETING…
