Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

ILLUSIONS LARGER THAN CONCESSIONS!

Tax reliefs granted by the FM in Budget 2012 are not only inadequate but also deceptive!

                   While the Finance Minister has been predictable, in announcing the much expected Rs.2,00,000 personal income-tax exemption limit (from the current limit of Rs.1,80,000), he has disappointed the lady taxpayer and the senior citizen by not making any significant increase in their respective exemption limits of Rs.1,90,000 and Rs.2,50,000.

                    Thus, while  all income-tax payers upto the taxable income of Rs.8,00,000 will get a tax benefit of Rs.2,060, a lady taxpayer has been handed only Rs.1,030 and the senior citizen (including Super Seniors above 80) virtually nothing by way of tax relief!

                     Taxpayers in the income range of Rs.8,00,000 to Rs.10,00,000 and Rs.10,00,000 and above shall have a definite reason to cheer, with tax saving of 10.3% and Rs.22,660 respectively.

Who will save how much tax in Financial Year 2012-13

 

Class of Taxpayers

Savings

A.

Male taxpayers and HUFs having income upto 8 lakhs

2,060

B.

Female taxpayers having income upto 8 lakhs

1,030

C.

Individual taxpayers and HUFs having income between 8 lakhs and 10 lakhs

  1. or B. + 10.3%

D.

Individual taxpayers and HUFs having income above 10 lakhs

22,660 

 

Basic tax exemption limits for Financial Year 2012-13

Class of Taxpayers

F.Y. 2011-12

F.Y. 2012-13

Male taxpayers upto 60 years and all HUFs

1,80,000

2,00,000

Female taxpayers upto 60 years

1,90,000

2,00,000

Resident taxpayers between 60 years to 80 years

2,50,000

2,50,000

Resident taxpayers 80 years and above

5,00,000

5,00,000

 

Deduction of upto Rs.10,000 for interest income

                     From FY 2012-13, a deduction of upto Rs.10,000 shall be allowed to an individual or HUF in respect of any interest income in a savings account with a bank or post office under the proposed new section 80-TTA. It is, however, unfortunate that this benefit is not to be allowed in respect of interest on time deposits. Is the FM aware of the fact that a savings account reaps interest at 4% per annum and a taxpayer can effectively earn Rs.10,000,  only if he maintains average annual balance of Rs.2,50,000? This is not a practical proposition and hence the said deduction will serve limited purpose for most taxpayers!  

Hufs included in the definition of relatives!

                     Taking a cue from the decision of the Hon’ble ITAT Rajkot Bench in the case of ‘Vineetkumar Bhalodia’, wherein the Bench held that HUF is a group of relatives, the FM has provided some welcome relief by adding an HUF to the definition of relative u/s. 56. Any gift received from or given to an HUF by its members shall be exempt from tax, irrespective of the amount of such gift. However, in case of a gift by an individual to his HUF, the implications of the clubbing provisions of Section 64 of the I.T. Act must be borne in mind. 

 Deduction of Rs.5,000 for preventive health check-up

                             From F.Y. 2012-13, an additional deduction of upto Rs.5,000 shall be allowed to an Individual or HUF in respect of expenditure on preventive health check-up of the taxpayer or his family (including his parents), under the present Section 80D.  Taxpayers need to be aware that unlike the medical insurance premium benefit of Rs.15,000 u/s. 80D, the afore mentioned benefit is consolidated and no separate deduction of upto Rs.5,000 is available on expenditure incurred for health check-up of taxpayer’s parents. It needs to be represented that a taxpayer must be atleast allowed to avail the unutilized balance of his deduction towards medical premium, for purpose of additional expenditure, if any, incurred for health check up. 

  Tax audit limits raised to Rs.1 crore

                             With effect from Assessment Year 2013-14, the turnover limits for purposes of compulsory tax audit for business u/s.44AB and presumptive taxation u/s.44AD have been revised to Rs.1 crore from the current limit of Rs.60 lakhs. In case of profession, the said revision will be from Rs.15 lakhs to Rs.25 lakhs.

 Senior citizens not to file advance tax!

                             The only relief to seniors above the age of 60 is granting them exemption from the payment of advance tax with effect from the coming F.Y. 2012-13. However, the said benefit shall not be available to senior citizens engaged in any business or profession.

 Tax professionals to become truly busy!

             With 113 clauses of the Finance Bill dealing with a wide range of complex provisions for widening of tax base, measures to prevent generation and circulation of unaccounted money, rationalization of TDS, international tax and transfer pricing provisions and introduction of General Anti-Avoidance Rule (GAAR), tax professionals will have to burn the midnight oil to read in between the lines of the numerous amendments proposed. 

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