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You are here : Moneycontrol » News » Tax - Expert

Cuts in duties for consumer goods is good!

Published on Fri, Feb 29 at 14:36 , Updated at Fri, Feb 29 at 19:32
Source : Moneycontrol.com

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By Sanjay Matai

Finally the wait is over and the Finance Minister (FM) Mr Chidambaram has unveiled the Budget 2008, which in all probability will be the last budget presented by the present Government.


And as was expected, there are a whole lot of sops announced by Mr Chidambaram, keeping in mind the buoyant tax collections in 2007-08 and forthcoming general and many state elections over the next 12-15 months. However, given the high expectations built-up over the last 1-2 months, there are some predictable disappointments too.

 

Here’s a quick look at how we are going to be impacted by Budget 2008. This is, of course, a preliminary assessment based on the budget speech pending the detailed reading of the Finance Act 2008-09.

  
Income tax slab enhanced. Simply great!

The income tax slabs rates have been changed as under:

Earlier Slabs New Slabs
Upto Rs.1,10,000     :  NIL Upto Rs.1,50,000     :  NIL
1,10,000 – 1,50,000 :  10% 1,50,000 – 3,00,000 :  10%
1,50,000 – 2,50,000 :  20% 3,00,000 – 5,00,000 :  20%
2,50,000 & above    :   30% 3,00,000 – 5,00,000 :  20%







Note: Further for women the minimum exemption limit has been increased from Rs 1.45 lakh to Rs 1.80 lakh and senior citizens from Rs 1.85 lakh to Rs 2.25 lakh.

There is a SUBTANTIAL benefit on account of this change in the slab rates of income tax.  

For example, a person earning Rs 30,000 per month or Rs 3.6 lakh per annum will now have to pay an income tax of only Rs 27,000 as against Rs 57,000 earlier. Or a person earning Rs 5 lakh per annum will see his tax liability drop from Rs 99,000 to Rs 55,000.

Excise duty cut on small cars and 2/3 wheelers. Good!
The excise duty on small cars and 2/3 wheelers has been reduced from 16% to 12%. This will make them cheaper. For small cars this impact should roughly be around Rs 10,000-15,000. Similarly, 2 wheelers may become cheaper by around 5%.

Reverse mortgage money not an income. Good!
Mr Chidambaram has announced that the mortgage of property under the reverse mortgage scheme will not be considered as a transfer of property.
Accordingly, the money received from banks will not be income in the hands of the property owner and hence will not attract income tax.

Enhanced deduction for mediclaim premium. Good!
Presently u/s 80D, a person is entitled to a deduction of upto Rs 15,000 for the premium paid to get medical insurance for himself/herself or the spouse, the dependent children or the dependent parents.

Now the FM has announced additional Rs 15,000 as deduction for premium paid for medical cover of the parents. This will help those persons whose parents were not having taxable income. Therefore, earlier neither they themselves nor their parents could get tax benefit on paying such premiums.   

General reduction in excise duty and CST. Good
Presently, various goods of common use are levied an excise duty of 16%. This is now proposed to be reduced to 14%. Further the central sales tax is being reduced from 3% to 2%.

These measures will see an across the board reduction in prices of a no. of goods. This will not only offset the small increase that was expected on account of increase in oil prices, but would also reduce inflationary pressure in the economy. Therefore, apart from reduced prices of a whole of products of common use, inflation may also fall. This may have an added benefit of RBI reducing the interest rates sooner than later.

Continued in page 2

The author, Sanjay Matai is a financial advisor and promoter of www.wealtharchitects.in.

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