Tuesday, July 7, 2009

India Budget: Fat Cats Never Had It So Good

If more proof was needed that the aam aadmi for the Congress means the super-rich, just see the huge tax breaks given to the fat cats. While crumbs have been thrown at the ordinary middle class folks, the movers and shakers have a bonanza awaiting them when it comes to filing tax returns next year.

Thanks to the 2009-10 Budget proposals will have people in the higher income strata laughing their way to the bank or mall for LCDs which are now cheaper. Indeed, the richest must be doing cartwheels after Finance Minister Pranab Mukerjee on Monday raised the basic exemption limits for all income groups.

For men and women, the basic exemption limit was hiked by Rs 10,000. For men, the hike is from Rs 1.5 lakh (Rs 150,000) to Rs 1.6 lakh (Rs 160,000). For women, the rise was from Rs 1.8 lakh (Rs 180,000) to 1.9 lakh (Rs 190,000). For senior citizens, the limit was increased from Rs 2.25 lakh (Rs 225,000) to Rs 2.4 lakh (Rs 240,000), a rise of Rs 15,000.

However, the important move was to do away with the 10 per cent surcharge imposed on annual income of above Rs 10 lakh.

All About Tax Proposals

This means the government has returned Rs 11,700 crore (Rs 117 billion) to individual taxpayers. This amount was slated to be collected from the 10 per cent surcharge, according to the interim Budget estimates.

“While the hike of Rs 10,000 was not too significant, the removal of 10 per cent surcharge would allow an additional benefit of 3 per cent a year and increase the investible surplus,” said NC Hegde, partner, Deloitte, Haskins and Sells.

The benefits kick in as soon as your salary crosses Rs 10 lakh. That is, for persons who have taxable income of Rs 10 lakh, the saving is only Rs 1,030 a year.

If the income rises by even Rs 1 from there, the tax burden falls from Rs 232,265 to Rs 210,120, a saving of Rs 22,145. And for incomes of Rs 15 lakh-50 lakh, the savings would be between Rs 37,000 and Rs 145,000.

The New Tax Slabs

Another reason to smile for taxpayers in the higher income strata has been the hike in the wealth tax limit from Rs 15 lakh (Rs 1.5 million) to Rs 30 lakh (Rs 3 million).

At present, wealth tax is charged at 1 per cent. The highest bracket (30 per cent tax limits) starts at Rs 500,000. However, 80 per cent of Indians live on less than Rs 10,000 per year. And thereby hangs a shameful tale.

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