Marginal raise in I-T exemption limit, sops in Pranab's Budget

In a mix of sops and imposts, the General Budget on Friday proposed a marginal raise in income tax exemption limit of Rs. 20,000 but hiked service tax and standard excise duty by 2 per cent across the board to net an additional Rs. 41,440 crore a year.

The Budget for 2012-13 presented by Finance Minister Pranab Mukherjee in the Lok Sabha, however, left corporate tax rate and peak customs duty unchanged while the import duty on gold bars and platinum and excise duty on cigarettes, bidis, pan masala and chewing tobacco were raised.

Customs duty on completely built large cars, SUVs and MUVs, of value exceeding USD 40,000 (Rs 20 lakhs) was also raised.

While the direct tax proposals in the Budget will result in a revenue loss of Rs. 4,500 crore, indirect tax proposals would result in a revenue gain of Rs. 45,940 crore. Thus the tax proposals lead to a net gain of Rs. 41,440 crore.

The Budget makes a provision of Rs. 1,93,407 crore for defence services including Rs. 79,579 crore for capital expenditure. The allocation is based on present needs and any further requirement would be met, Mr. Mukherjee said.

Proposals on individual income

Under the budget proposals, individual income up to Rs. 2 lakh will be free from income tax as against Rs. 1.80 lakh currently.

Income between Rs 2 lakh and 5 lakh will be taxed at the rate of 10 per cent while that above Rs. 5 lakh but less than Rs 10 lakh would attract 20 per cent, and above Rs 10 lakh it would be 30 per cent.

The Budget also allows individual tax payers a deduction of up to Rs. 10,000 for interest from savings bank account which would help a large number of small tax payers with salary income up to Rs. 5 lakh and interest from saving banks accounts up to Rs. 10,000 as they would not be required to file income tax returns.

For health insurance, the Minister proposed to allow a deduction of Rs. 5,000 for preventive health check-up.

Senior citizens who do not have any income from business are proposed to be exempted from payment of advance tax, reducing their compliance burden.

While not proposing any change in the tax rate, the Budget proposes certain measures to allow corporates to access lower cost funds and to promote higher level of investments in several sectors.
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