Income Tax Slab 2011 : Peanuts for the average taxpayer

Finance minister Pranab Mukherjee’s announcement raising the tax exemption limit for salaried employees from Rs. 1.6 lakh to Rs. 1.8 lakh translates to little in terms of income tax relief — Rs. 166 per month or roughly Rs. 2,000 annually.

Women taxpayers might be disappointed too by the latest budget as they have not been given any new tax benefit. The tax exemption limit remains unchanged at Rs. 1.9 lakh. The new tax regime will not have a separate category for women taxpayers.

Tax deductions allowed under Section 80C of the Income Tax Act has been left unchanged at Rs. 1 lakh. The government has also left the tax rates unchanged.

In an attempt to simplify the taxation process and make things easier for the taxman, salaried employees who do not have any other source of income have been exempt from furnishing tax returns as the tax deducted at source is already reported by the employers.

“ We will have to wait and see how it comes in the notification. It looks pretty good on paper, but it will benefit only a minuscule portion of salaried taxpayers as most have additional sources of income such as interest on savings or fixed deposits, rental income and equities,” says Sonu Iyer, partner ( tax and regulatory services), Ernst & Young.

If anybody has a reason to smile, it’s the senior citizens who are the main beneficiary in the latest budget. The finance minister has reduced the age limit for classification as a senior citizen from 65 years to 60 years. The tax exemption limit has also been increased from Rs. 2.4 lakh to Rs. 2.5 lakh for the senior citizens.

A new tax category has been created for very senior citizens” above 80 years, who will enjoy a tax exemption limit of Rs. 5 lakh.

“ The budget is a fine balancing act. The government had its own challenges in terms of inflation, fiscal deficit and rising subsidy,” says Vikas Vasal, executive director, KPMG India. “ It was not expected to bring any radical change for the reason that most of the structural changes have been made in the proposed Direct Taxes Code ( DTC), which is to be implemented from April 2012. Therefore, minor optical changes have been made in transition towards the DTC.”