Individual tax payers will be looking forward to some relief from Finance Minister Pranab Mukherjee despite a rise in fiscal deficit. On the other hand, the industry may see excise duty hiked to pre-crisis levels of 2008. The challenge before Pranab Mukherjee would be to balance populism with some tough measures.
Here are five key tax proposals expected in this Budget:
1. Income tax slabs may be raised marginally: The Direct Taxes Code ( DTC) Bill has also made a mention of it. The DTC, which will replace the Income Tax 1961, is unlikely to come into force from 2012-13. The Standing Committee of Parliament that has scrutinized the DTC Bill had suggested raising the tax exemption limit to Rs3 lakh but that is unlikely.
Currently, income above Rs1.80 lakh is taxed at 10%.
Income 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%
2. Tax exemption limit on investment may be hiked to encourage more public savings. This includes principal of home loans, life insurance premium, child tuition fees and retirement funds. A hike in this limit will help raise the savings of Indian households.
Currently, deduction under section 80C of the IT Act ( investments in PF, PPF, insurance etc.) is Rs 1.20 lakh.
3. The interest deduction limit for self-occupied house could be increased to Rs 2-3 lakh per annum.
Currently, interest deduction is permitted to the tune of Rs 1.50 lakh.
4. Hike in indirect taxes: Excise duty and service tax may be hiked by 2% each to the pre-crisis levels of 12%. A negative list of services may be introduced.
What is excise duty: Now called the Central Value Added Tax ( CENVAT), the excise duty is a tax on the production or sale of a good.
Currently, excise duty stands at 10%.
5. Hike in Minimum Alternate Tax (MAT): The government may hike MAT from 18.5% currently to 20%.
What is MAT: The Indian Income Tax Act contains large number of exemptions, deductions and depreciation provisions because of which many companies pay zero tax inspite of having high book profit. Minimum Alternate Tax ensures that such companies pay a minimum percentage of the book profit in case the tax on the total income computed under the law is less than this amount.
....more info
Here are five key tax proposals expected in this Budget:
1. Income tax slabs may be raised marginally: The Direct Taxes Code ( DTC) Bill has also made a mention of it. The DTC, which will replace the Income Tax 1961, is unlikely to come into force from 2012-13. The Standing Committee of Parliament that has scrutinized the DTC Bill had suggested raising the tax exemption limit to Rs3 lakh but that is unlikely.
Currently, income above Rs1.80 lakh is taxed at 10%.
Income 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%
2. Tax exemption limit on investment may be hiked to encourage more public savings. This includes principal of home loans, life insurance premium, child tuition fees and retirement funds. A hike in this limit will help raise the savings of Indian households.
Currently, deduction under section 80C of the IT Act ( investments in PF, PPF, insurance etc.) is Rs 1.20 lakh.
3. The interest deduction limit for self-occupied house could be increased to Rs 2-3 lakh per annum.
Currently, interest deduction is permitted to the tune of Rs 1.50 lakh.
4. Hike in indirect taxes: Excise duty and service tax may be hiked by 2% each to the pre-crisis levels of 12%. A negative list of services may be introduced.
What is excise duty: Now called the Central Value Added Tax ( CENVAT), the excise duty is a tax on the production or sale of a good.
Currently, excise duty stands at 10%.
5. Hike in Minimum Alternate Tax (MAT): The government may hike MAT from 18.5% currently to 20%.
What is MAT: The Indian Income Tax Act contains large number of exemptions, deductions and depreciation provisions because of which many companies pay zero tax inspite of having high book profit. Minimum Alternate Tax ensures that such companies pay a minimum percentage of the book profit in case the tax on the total income computed under the law is less than this amount.
....more info