rediff.com Budget 2000: Taxation consultant Ganesh Jagadeesan on the Budget.


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February 29, 2000

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Personal taxation: No major surprises

Taxation consultant Ganesh Jagadeesan on the Budget.

Re: increased rate of surcharge up to 15%- the limit of Rs 1.5 lakhs could have been pegged at a higher level
Surcharge is an additional levy on the income tax- E.g. surcharge @ 10% applicable if total income of a resident exceeds Rs 60,000 - surcharge rate goes upto 15% for total incomes above Rs 150,000
No major changes on taxation for NRIs
Dividend received is still tax-free; however, doubling in dividend tax may indirectly & adversely affect dividend income of individuals due to possibly reduced outflow from corporates as dividend
Senior citizens - good news - tax rebate u/s 88B - increased to Rs 15,000 from Rs 10,000 - hence, income for senior citizens upto approx Rs 125,000 would not be liable to income tax
Disappointment for software professionals - no shift in tax incidence for e-SOP for software e-employees
Re: exemption from Capital Gains tax on investments u/s 54EA & 54EB - newly notified investments - relatively illiquid (longer tenure - 5 years against 3 and 7 years) - possibly less attractive in terms of earnings (e.g. new Govt sec. may not be as rewarding as Mutual funds which were previously eligible for investment)
S.88 - amount eligible for rebate on repayment of principal amount of Housing loan increased from Rs 10,000 to Rs 20,000
S.24(2) - enhanced limit of Rs 75,000 for interest paid on Housing Loans announced in last budget for upto April 1, 2001 will now continue upto April 1, 2003
One-by-six scheme presently applicable to 54 cities - now extended to almost all cities with a population over 2 lakhs
From July 1, 2000 - PAN to be allotted within 30 days of application
Refund of income tax - additional option to have refund amount directly credited to assessee's bank a/c
The limit of Rs 1.5 lakhs could have been higher
Even we too could not catch what the FM was exactly trying to say - but we understand that there is an additional rebate of Rs 5,000 for women
The negative reaction of the stock markets would make us believe so.
Major changes - surcharge on non-corporate assessees increased from 10% to 15% on income over Rs 1.5 lakhs; senior citizens - tax rebate u/s **B increased to Rs 15,000; for women - additional rebate of Rs 5,000
Tax rebate for senior citizens is u/s 88B
Incentives to invest in housing - u/s 88 - increase in eligible amount of repayment of principal (housing loan) from Rs 10,000 to Rs 20,000 - also, deduction of interest on such loans upto Rs 75,000 originally upto April 1, 2001 (per last budget) now extended upto April 1, 2003
The hike in exemption limit for FII to invest in Indian firms will not apply to NRIs
The benefit referred to covers senior citizens only. Working women, however, are now eligible for an additional rebate of Rs 5,000. Also, the marginal rate of tax is now 34.5%
We don't know whether abolition of income tax will increase savings level; what we know for sure is if this happens professionals like us will be out of business.
Investments u/s 54EA & EB were meant for claiming relief from capital gains tax. Post-this budget, the notified investments (presently, bonds of NABARD & NHAI) are of
Uniform 5 year-tenure (hitherto, 3 or 5 years); these investments may not be as rewarding as investments in some of the earlier instruments such as specified mutual funds
No change in basic tax structure; surcharge raised to 15% for income level over Rs 1.5 lakhs. No change in tax incidence for ESOP
Surcharge raised to 15% for income levels above Rs 1.5 lakhs
General providend fund rates slashed by 1% to 11%
Income tax slabs remain the same
U/s 80E, deduction allowed for repayment of amount borrowed and interest thereon for higher education out of own income - such amount raised to Rs 40,000 from Rs 25,000 at present

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