A balancing act: Some relief for the common man

The inflation baffled aam adami generally expects a lot from the finance minister in the form of tax concessions.

But at the same time, the finance minister has a difficult task of managing the fiscal deficits.  To meet the expectations of the common man and also as a step towards the proposed Direct Taxes Code, the finance minister has tried to harmonise Budget 2011 with the DTC.

To start with, the basic exemption limit for general category of tax payers has been enhanced to Rs 180,000 p.a from Rs 160,000 p.a.

This proposal to enhance the basic exemption limit will lead to an annual savings of Rs 2,060 p.a. for various tax payers.

Further, for senior citizens, the increase in basic exemption limit to Rs 250,000 p.a. from Rs 240,000 p.a. will lead to an annual savings of Rs 1,030.

The age for qualifying as a senior citizen has been lowered to 60 years from 65 years.

This in fact has been most awaited and a welcome step which also leads to a saving of Rs 9,270 p.a. for individuals between the age group of 60 to 65 years.

Similarly, resident women between age brackets of 60 to 65 years will save Rs 6,180 p.a.

Another step to grant relief to senior citizens is the introduction of a special category of "very senior citizens". 

The very senior citizen category proposes to cover resident citizen of 80 years and above. The basic exemption limit for this category has been capped at Rs 500,000 and this will benefit the individuals of 80 and above years with an annual savings of Rs 26,780 p.a.

The proposal to provide relief to the senior citizens in form of reduction of increasing threshold limit, lowering of qualifying age and introduction of very senior citizen category is a positive step as the senior population can now think of spending the saved money on health insurance schemes which is a major concern for them.

There is also a proposal to continue to allow tax payers, the additional deduction of Rs 20,000 for one more year in respect of investment in long term infrastructure bonds.  While this will save tax in the hands of the tax payers, it will also help in raising funds for infrastructure developments. 

The Budget has yet another provision to promote savings by providing additional deduction (up to specified limits) in respect of employer's contributions to the New Pension Scheme.

This deduction which will now be over and above the overall limit of Rs 1,00,000  p.a. otherwise specified for certain contributions like Provident Fund and Superannuation. 

Along with the above, the finance minister has aimed to reduce the procedural compliances to some extent. The return filing requirement for salaried tax payers where taxes have been deducted at source by the employer is proposed to be simplified and such taxpayers will no longer need to file their tax returns provided they do not have any other sources of income to report.

One can say that with the host of expenditure plans announced in the Budget, the finance minister has managed not to burden the common man directly with taxes.

Parizad Sirwalla is executive director, tax, KPMG; and Neetika Khosla is senior manager, tax, KPMG.