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Tuesday, Jul 07, 2009
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National

Marginal relief for taxpayers

Special Correspondent

Fringe Benefit Tax, Security Transaction Tax, Commodity Transaction Tax go

NEW DELHI: In keeping with the expectations of the salaried class, Finance Minister Pranab Mukherjee on Monday proposed relief to individual taxpayers and pensioners by raising the income-tax exemption limit by up to Rs.15,000 and removing the surcharge for those earning more than Rs.10 lakh annually.

Alongside, the Minister also announced complete abolition of the Fringe Benefit Tax (FBT) which had been an irritant for corporates. He also scrapped the Security Transaction Tax (STT) to boost the stock market and the Commodity Transaction Tax (CTT) to encourage commodity markets.

Presenting the Union budget for 2009-10, Mr. Mukherjee announced an increase of Rs. 10,000 in the basic exemption limit for general taxpayers and Rs. 15,000 for senior citizens (above 65 years).

Following the revision, the general male assessees will have to fork out a tax of 10 per cent on an annual income of Rs. 1.60 lakh to Rs. 3 lakh. For women, the tax would be on an income of Rs. 1.90 lakh to Rs. 3 lakh.

As for senior citizens and pensioners, the new basic exemption limit will be Rs. 2.4 lakh annually and the 10 per cent tax would be levied on an income up to Rs. 3 lakh.

Surcharge scrapped

While all taxpayers, including women and senior citizens, will have to pay 20 per cent tax on income between Rs. 3 lakh and Rs. 5 lakh and 30 per cent on income above Rs. 5 lakh, those earning more than Rs. 10 lakh annually will stand to benefit more as the 10 per cent surcharge stands scrapped.

The total revenue forego on account of the revision is estimated at about Rs. 5,000 to Rs. 6,000 crore.

Wealth tax threshold raised

Mr. Mukherjee also extended the deduction on interest on loans for higher education to benefit all fields of study, including vocational studies.

For better medical treatment or maintenance of disabled dependants, the deduction for tax purposes has been raised from Rs. 75,000 to Rs. 1 lakh.

These apart, the Minister proposed to raise the threshold for wealth tax from Rs. 15 lakh to Rs. 30 lakh.

Structural changes

The government also promised to bring about structural changes in direct tax. “I propose to pursue the structural changes in direct taxes by releasing a new Direct Taxes Code within the next 45 days,” he said.

The Direct Taxes Code Bill, which will eventually replace the Income Tax Act, 1961 and other tax laws, is to be introduced in the Lok Sabha during the winter session. Noting that tax reform was a process and not an event, he said the government would release the draft as a discussion paper for public debate.

“Based on the inputs received, the government will finalise the Direct Taxes Code Bill,” he said.

Likewise, for structural changes in indirect taxes, the process for implementing the proposed Goods and Services Tax (GST) by April 1, 2010 would be expedited.

The GST, aimed at doing away with most of the indirect taxes, would have a dual structure with two components: a Central levy and a State levy.

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