Mar. 23 – Ordinary Indian citizens have a lot of hope for the Budget 2012-13 in terms of more income tax freedom, more income tax deductions, and the documents potential to rein in inflation. Even while the average citizen is also interested in growth and industrial development, that last point, inflation, will definitely be of chief concern.
The Union Budget has increased the tax exemption limit to Rs. 20,000 for general category males giving tax relief of Rs. 2,000 and Rs. 10,000 for females giving Rs. 1,000 for individuals with incomes up to Rs. 8 lakh.
Furthermore, a Rs. 5,000 deduction will be allowed for preventive health check-up U/S 80D, but the same is within the total limit of Rs. 15,000, and the threshold limit of 80D now will be used for medical claim policy as well as for preventive health check-ups. So the individual having a medical claim policy equal to or above Rs. 15,000 is not going to have any benefit from this.
Additionally, the Finance Minister has proposed a new scheme in the Union Budget called the Rajiv Gandhi Equity Savings Scheme which is aimed at promoting the flow of savings in financial instruments while also improving the depths of the domestic capital market. Now, individuals having income up to Rs. 10 lakh can buy stocks up to Rs. 50,000 with a lock-in period of three years and will get 50 percent of the investment under the scheme (i.e. up to Rs. 25,000). But the deduction into infrastructure bonds up to Rs.20,000 will no longer be there since this advantage was initially declared for the financial year 2010-11. This was extended to the financial year 2011-12, but will not be extended for the financial year 2012-13. As such, individuals need to invest double under the new scheme in order to get the same deduction that he/she was getting by investing in the infrastructure bonds.
Operating expenses are also bound to go up more than the relief received under the new Budget since the service tax net has been widened to include almost all services – comprising a huge chunk of the household consumption basket. Only 17 items, such as vital education, public transportation, and services meant for agriculture are exempt from this tax. The Union Budget has proposed increasing the service tax by 2.06 percent which will certainly increase the costs of telephones, coaching classes, eating out, gyms, cable TV, health care, life insurance, real estate/stock broker salons, air travel, courier and packaging services.
The hike in excise duties and customs duties is going to expand our expenses as manufacturers are bound to pass these on to the consumer. Prices of jewelry are also set to rise as customs duties on gold and platinum have been hiked from 2 percent to 4 percent while the excise duty on gold has been increased from 1.5 percent to 3 percent.
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