Union Budget 2010-2011 income tax highlights

Budget 2011 has come and gone.

Amidst rising interest rates, spiraling inflation and a basket full of scams, the government was expected to deliver Budget 2011 to make its mark with a bang. Did it ? Depends on who you are talking to.

Let’s take a sneak look at what the Finance Minister Pranab Mukherjee had to offer for the tax paying citizen.

Forget filing IT returns, only some of you !

Today every individual whose income exceeds the taxable limit has to file income tax returns.

Budget 2011 has done away filing of income tax returns for a section of the tax paying population. If a person’s salary is Rs 5 lakh or less and tax has been deducted by the employer and paid to the government then the individual does not have to file income tax returns. For such people, Form 16 as issued by the employer will serve as income tax returns.

In case there are other sources of income, it is not very clear whether the employer is expected to take inputs from the employee for deductions or whether the individual will have to file returns separately.

This move might come as a relief to both tax payers and the income tax department as half of theĀ  35 million tax paying population of India are the salaried class.

Direct Tax Code to make its debut on April 1 2012

As per Budget 2011, the much discussed Direct Tax Code will now be implemented from April 1 2012. In the Direct Tax Code Bill, the annual income tax exemption limit is proposed at Rs 2 lakh, compared to Rs 1.6 lakh at present.

The DTC will widen tax slabs to levy 10% tax on income between Rs 2 lakh and Rs 5 lakh, 20% on Rs 5-10 lakh and 30% above Rs 10 lakh.

Budget 2011 and Income Tax Highlights

Income tax slabs raised, only for men !

The current income tax slabs have been tweaked a bit in Budget 2011. The exemption limit has been raised from Rs 1.6 lakh to Rs 1.8 lakh for men.

Male taxpayers with a minimum taxable income of Rs 1,80,000 per annum or Rs 15,000 per month will save approximately Rs 2,000 annually. Income between Rs 1,80,001 and Rs 5,00,000 will now be taxed at 10% instead of the earlier slab that started from Rs 1,60,001 to Rs 5,00,000. The other two income slabs have been left unchanged at Rs 5,00,001 and Rs 8,00,000 and Rs 8,00,001 and above. Incomes in these two slabs will continue to be taxed at 20% and 30%.

Women taxpayers must be left disappointed as there was nothing much in store for them in Budget 2011. They will continue to pay tax at the rate of 10% on income between Rs 1,90,000 and Rs 5,00,000. Income above Rs 5,00,000 will be taxed at the same rate of the general category taxpayers.

Check here for the income tax slabs of earlier years.

Bonanza for senior citizens in Budget 2011

Senior citizens must have suddenly felt so young.

Firstly, the exemption limit of Rs 2.4 lakh for senior citizens has been increased to Rs 2.5 lakh. That is an increment of Rs 10,000.

Secondly, Budget 2011 brought down the age of senior citizens from the current 65 years to 60. This means that people between the age of 60 and 65 who were teated as general tax payers earlier will now be labeled senior citizens and so their exemption limit will be Rs 2.5 lakh.

Thirdly, a new category of “Very Senior Citizens” has been created for people who are above 80 years of age. For this group, the exemption limit is Rs 5 lakh. The tax rate on income between Rs 5,00,001 and Rs 8,00,000 and Rs 8,00,001 and above will remain at 20% and 30% respectively. This will result in tax savings of Rs 26,780 for very senior citizens.

New Income Tax slabs after Budget 2011

Here is how the overall income tax slabs will look like.

Income Tax Slabs – AY 2012-2013
Tax Slabs (in Rs) Income tax
Indian Male/NRI/HUF 0 to 1,80,000 NIL
1,80,001 to 5,00,000 10%
5,00,001 to 8,00,000 20%
Above 8,00,000 30%
Women 0 to 1,90,000 NIL
1,90,001 to 5,00,000 10%
5,00,001 to 8,00,000 20%
Above 8,00,000 30%
Senior Citizen (>60 yrs) 0 to 2,50,000 NIL
2,50,001 to 5,00,000 10%
5,00,001 to 8,00,000 20%
Above 8,00,000 30%
Very Senior Citizen (>80 yrs) 0 to 5,00,000 NIL
5,00,001 to 8,00,000 20%
Above 8,00,000 30%

Other snippets of Budget 2011

# The finance minister has introduced a new form called “SUGAM” to reduce the compliance burden of small taxpayers who fall within the scope of presumptive taxation.

# The Income Tax department will also launch more enters of ASK (Aaykar Seva Kendra). ASK is a pilot project which has been launched by the IT department to serve as a one stop shop for all enquiries for tax payers. In 2011-2012, 50 such ASK centers have been proposed to be set up. This will help speedup refunds for tax payers.

# Deduction of up to Rs 20,000 for investment in long-term infrastructure bonds will be continued for one more year. This will help tax payers save tax of approximately Rs 6,000.

Did you like the budget or were left disappointed ?

Comments

  1. Hi Radhey,
    Thanks a lot ! Very informative article.So If I earn below 5 lakhs , there is no need to file IT returns personally from this financial year. What ever the company submits for returns as a whole is enough?
    I believe it is applicable from this year.Am I Right?

    • TheWealthWisher says:

      @RaviShankarKota, Yes this is what has been proposed. It is applicable for previous year 2011-2012 which is same as assessment year 2012-2013. So it is applicable for your earnings from March 2011 to March 2012.

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