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Goofy, a 24 year old techie, in Bangalore was worried to the core. He was constantly scrolling the TV channels to find out if there is any relief for a salaried class like him.surprise

But alas, there is nothing. The only thing that matters to him and to a large part of the salaried class is Basic exemption limit, But the FM Chiddhu decided to keep it unaltered.angry

After running his brain for an hour over the Tax jargon and finger tips over TV remote, he switches off the TV and started cursing Government.frown

His friend CA Maroo who stays in his neighbor comes to his rescue.

CA Maroo:- Dude! Whats up? Looking down!! Again Torzan is creating problems or is it a new virus?

Goofy:- No yaar! I don't know what virus is eating my salary. I was hoping to get a good relief this year in exemption limit, keeping election year in view.

CA Maroo:- So that is your problem. Did u analyze this year budget by any chance.

Goofy:- Yeah Man, from last one hour, I was ogling at News channels and listening to TV debates.

CA Maroo:- Great!! Do you know that there is a Tax relief for a salaried person in salary bracket of Rs 5,00,000.

Goofy:- Yes, That is another problem. Now, what does this mean. Do I have to comply with some other formalities. I don't know I am confused to the core.

CA Maroo:- Now here is a good News for you. Actually, there is a good increase in Basic exemption limit, but in  disguise.

Goofy:- There could be only two reason behind what you are saying:-

1) You have lost it (pointing towards his brain) or 

2) You think I have lost it.

CA Maroo:- Don't be paranoid and listen to me carefully, See the tax bracket for an Individual below 60 years is:-

Income Slabs

Income Tax Rate

i.

Where the total income does not exceed Rs. 2,00,000/-.

NIL

ii.

Where the total income exceeds Rs. 2,00,000/- but does not exceed Rs. 5,00,000/-.

10% of amount by which the total income exceeds Rs. 2,00,000/-

iii.

Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-.

Rs. 30,000/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.

iv.

Where the total income exceeds Rs. 10,00,000/-.

Rs. 130,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.

Education Cess: 3% of the Income-tax.R ight?

Goofy:- Dude, tell me something new. Even a kindergarten know this.

CA Maroo:- Let me finish. Now suppose you have a salary of 5,00,000 and you don't have any deduction in section 80 C. This means you are paying a total Tax of Rs 30,000. Now, you are getting a relief of Rs 2000 as tax credit. This means net you are paying Rs 28,000, keeping EC out of equation.

Now let us take a different case, let us assume that basic exemption limit is Rs 2,20,000.

Goofy:- In your dreams!

CA Maroo:- No man, Just listen. This means your taxable income is Rs (5,00,000-2,20,000) i.e. Rs 2,80,000 and tax payable is Rs 28,000. So, by getting a tax credit of Rs 2,000, you are actually paying the same tax, had they increased the basic exemption limit to Rs 2,20,000.

Goofy:- I always knew, that There is something good in this budget :Penlightened

CA Maroo:- Yeah, yeah Mr. Sherlock.cool

Goofy:- But one thing is still not clear, If they are giving this relief, why they have not directly raised the bar to Rs 2,20,000.

CA Maroo:- Now that's a good question. You know that economy is not doing good, right?

Goofy:- I don't remember when it was doing good :PP.

CA Maroo:- Stop kidding!! Coming to the point again, So, the Economy is not doing good and government needs huge fund to meet it expenses. Now, when the government is giving Rs 2,000 as tax credit, it's sacrificing a revenue of Rs 3600 crore (Rs 2000 * 1.8 Million tax payer in Rs 5,00,000 bracket) but its not loosing its tax payers base. Had the bar was raised to Rs 2,20,000, hundreds and thousands of tax payers would have been out of tax net forever, making it very difficult to keep fiscal deficit in check. 

Goofy:- You again started, I told you earlier also, I feel sick when I listen these economic terms. Please stop it. and thanks for the info.

CA Maroo:- you are most welcome.

Your suggestions and criticisms are most welcomed. I will be waiting for your feedback.

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