Hike in exemption limits on expected lines: Homi P Ranina

Homi P Ranina, Tax Expert, says increase in the exemption limits is on expected lines. According to him, a person earning up to Rs 8 lakh will save Rs 54,000 a year by way of taxes.

“I had said earlier the Finance Minister is very sensitive to the needs of the poor people, the middleclass, the vulnerable section of society and this is why he has given the relief which is a step in the right direction.”

Here is a verbatim transcript of the exclusive interview with Homi P Ranina on CNBC-TV18.

Q: How much of the positive the personal income tax slab changes are?

Ranina: If you remember on Tuesday, I had mentioned to you that the will be an increase in the exemption limits and that’s exactly what has happened. What has happen is that now a person earning up to Rs 8 lakh will save Rs 54,000 a year by way of taxes. This is a very substantial benefit which the Finance Minister has given apart from the increase in the deduction under 80C by Rs 20,000 for investment in infrastructure bonds. He has also increased presumptive rate of taxation, exemption from Rs 40 lakh to Rs 60 lakh, all this was on expected lines. I had said earlier the Finance Minister is very sensitive to the needs of the poor people, the middleclass, the vulnerable section of society and this is why he has given the relief which is a step in the right direction.

Q: There is more relief though on the personal income side has that come as a welcome move?

A: Yes of course. I think reduction of Rs 50,000 for a person earning up to Rs 8 lakh is a substantial relief and nobody can doubt that and that will certainly spur consumption. I think lot of money is going to be spent on consumption. Lots of people are going to be left with enough money to repay their housing loans. Even increase under section 80 C to the extent of infrastructure bonds will help a few people.

Apart from that, if you see the other provisions allowing people to go in for presumptive taxation up to a higher limit, getting rid of the tax audit requirement, giving some benefit to NGOs who can now earn upto Rs 10 lakhs and not pay any income tax because of the change in the definition of a charitable purpose. I think all these things are going to be very-very helpful.

But I would still like to see the fine print, the Finance Bill and what the provision are made, for example for any type of anti avoidance rules being brought in, what is going to be the difference as far as tax treaties are concerned, that are still to be seen. Once that picture becomes clear, you will have a much better outlook on the corporate tax structure and how it will affect them.