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Union Budget – Direct tax proposals - an Individual Point of view

Introduction: Union budget-2014-15 presented by the Finance Minister today. New Government has presented this budget with facing several challenges like economic growth, GDP, Inflation and expectations from various sectors including individuals. This budget is not fulfilled everyone expectation, however it covered the steps which revive the economic growth in positive ways, this only has been told by the Finance minister that steps are only beginning of the journey towards a sustained growth of 7-8 % or above within 3-4 years along with macro-economic stabilization. In this article I would like to discuss about the direct tax proposals by the point of view of individual  

Increase of Basic exemption limit: Major expectation of increase in basic exemption limit has been given in the budget; the limit has been increased from Rs.2 lakhs to Rs. 2.50 lakhs for individuals except senior citizens and for senior citizens between 60 to 80 years has been increased from Rs. 2.50 lakhs to Rs. 3 lakhs. The revised income tax slabs are given below the table

Rates for Individuals below 60 years

Income slabs

Income tax rate

Income up to Rs. 2.50 lakhs

Nil

Rs. 2.50 to Rs. 5 lakhs

10%

Rs.5 Lakhs to Rs. 10 Lakhs

20%

Rs. 10 lakhs above

30%

Rates for Individuals below 60 years below 80 Years

Income slabs

Income tax rate

Income up to Rs. 3 lakhs

Nil

Rs. 3 to Rs. 5 lakhs

10%

Rs.5 Lakhs to Rs. 10 Lakhs

20%

Rs. 10 lakhs above

30%

Rates for Individuals 80 years & above

Income slabs

Income tax rate

Income up to Rs. 3 lakhs

Nil

Rs. 3 to Rs. 5 lakhs

10%

Rs.5 Lakhs to Rs. 10 Lakhs

20%

Rs. 10 lakhs above

30%

Surcharge of 10% on Income tax those taxable income exceeds Rs. 10 crore will apply.

Education cess will apply 3% on the Income tax & Surcharge will apply for all.

These changes in slab will give to individuals a minimum tax relief of Rs.5150

1. Increase in limit under section 80C: Very famous section among individuals is section 80C, the section gives rebate for various savings scheme till now Rs. 1 lakhs has been enhanced to Rs. 1.50 lakhs .  This changes will give boost to habit of savings by  the individuals and also give the minimum tax relief of Rs.5150

2. Increase in Public provident fund: Present investment cap of Rs. 1 Lakh under PPF scheme has been enhanced to Rs.1.50 lakhs which will help in the cap under section 80C.  This change will attract &  help to  make savings under PPF by the individuals

3. Increase in housing interest deduction: One more major section which individuals claim is housing loan interest under section 24.  Existing limit of Rs.1.50 lakhs for self occupied property interest deduction has been enhanced to Rs. 2 lakhs. This will give the marginal tax relief of Rs.5150 for those are claiming interest for self occupied property.

4. Increase tax rate on long term capital gain: Current tax rate on Long term capital gain has been increased from 10% to 20% on transfer of units of Mutual funds except equity oriented funds.

Conclusion: As an individual tax payer point of view, this budget given the minimum marginal relief of Rs. 5150 without any additional savings & Rs. 10,300 with an additional savings of Rs. 50000/-. Also made marginal satisfaction on those have saving more than Rs. 1 Lakh and unable to claim earlier years.

Thanks & Good Luck

CMA Ramesh Krishnan

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