There's little relief for income tax payers with the exemption limit being raised by Rs 10,000 to Rs 1,10,000. But with education cess being raised from 2 per cent to 3 per cent, the burden too has increased.
Thus, while taxpayers in the lower slabs benefit as the limit is raised, those in the higher tax bracket will be shelling out taxes at a higher rate. For instance, if a person was earning Rs 1.25 lakh, he would have paid Rs 2550 in 2006-07, he will pay Rs 1545 in 2007-08, assuming he does not avail himself of any other tax benefits.
For those earning Rs 5.10 lakh, there is no impact as they will continue to pay a tax of Rs 1,05,060. However, those earning more than Rs 5.10 lakh will now be paying more as taxes.
For instance an individual earning Rs 10 lakh will now pay Rs 1,470 more to Rs 2,56,470 lakh. Fortunately for taxpayers, the finance minister has left the surcharge of 10 per cent unchanged for incomes over Rs 10 lakh a year.
The exemption limit for women has been raised from Rs 1,35,000 to Rs 1,45,000, while for senior citizens (above 65 years), it has been raised from Rs 1,85,000 Rs 1,95,000. These two categories of taxpayers will benefit further.
Also, since the tax breaks on home loans have been left intact, individuals can avail themselves of those benefits-an amount of up to Rs 1,50,000 paid as interest is eligible for a deduction from income while an amount of Rs 1,00,000 paid as principal on a home loan is eligible for exemption under section 80C.
Benefits under Section 80C remain untouched so taxpayers can continue to avail themselves of those benefits too, by investing in products that are eligible for a tax exemption such as life insurance, public and employee provident fund and tax savings funds.
Thus, while taxpayers in the lower slabs benefit as the limit is raised, those in the higher tax bracket will be shelling out taxes at a higher rate. For instance, if a person was earning Rs 1.25 lakh, he would have paid Rs 2550 in 2006-07, he will pay Rs 1545 in 2007-08, assuming he does not avail himself of any other tax benefits.
For those earning Rs 5.10 lakh, there is no impact as they will continue to pay a tax of Rs 1,05,060. However, those earning more than Rs 5.10 lakh will now be paying more as taxes.
For instance an individual earning Rs 10 lakh will now pay Rs 1,470 more to Rs 2,56,470 lakh. Fortunately for taxpayers, the finance minister has left the surcharge of 10 per cent unchanged for incomes over Rs 10 lakh a year.
The exemption limit for women has been raised from Rs 1,35,000 to Rs 1,45,000, while for senior citizens (above 65 years), it has been raised from Rs 1,85,000 Rs 1,95,000. These two categories of taxpayers will benefit further.
Also, since the tax breaks on home loans have been left intact, individuals can avail themselves of those benefits-an amount of up to Rs 1,50,000 paid as interest is eligible for a deduction from income while an amount of Rs 1,00,000 paid as principal on a home loan is eligible for exemption under section 80C.
Benefits under Section 80C remain untouched so taxpayers can continue to avail themselves of those benefits too, by investing in products that are eligible for a tax exemption.