Budget 2010 & the Salaried Class

Here are some of the important changes which have been proposed in the Budget for the Financial Year 2010-11 which will have an impact on the taxability position of an Individual receiving Income under the head ‘Salaries’.

1. Tax Slabs

The basic exemption limit continues to be the same at Rs.1,60,000/-.That is, no Income Tax is chargeable for Income up to Rs.1,60,000/-. However, changes have been brought about in the Slabs for taxation.

• Income above Rs.1,60,000/- to Rs.5,00,000/- will be taxed at 10%. (For the Current Year this is up to Rs.3,00,000/-).
• Income above Rs.5,00,000/- to Rs.8,00,000/- will be taxed at 20%.  (For the current year , this is up to Rs.5,00,000/-)
• Income above Rs.8,00,000/- will be taxed at 30%. (For the current year this is above Rs.5,00,000/-).

2. Education Cess

Education & Higher Education Cess continues to remain at 3% on the Taxable Income.

3. Tax Saving Investments U/S 80C

Tax Benefit is available on investments made on certain classes of Investments upto Rs.1,00,000/-. (Life Insurance, NSC, Provident Fund, ELSS Mutual Fund Schemes, Principal Repayment on Housing Loan, Children’s Education Allowance, 5-year Bank Term Deposits, etc.)

Under the existing provisions, there is a limit of Rs.1,00,000 u/s. 80CCCE which is for specific deductions in computing the total income under section 80C, 80CCC & 80CCD; a new section has been inserted for granting deduction to individual or HUF in computation of its total income.

The proposed section 80CCF provides for a deduction to an individual or a HUF upto the limit of investment of Rs.20,000/-, over and above the existing limit of Rs. 1 lakh under section 80CCE. The said investment has to be made in Long Term Infrastructure bonds to be notified by the Central Government.

4. Deduction for Medical Insurance under section 80 D

Under the existing section 80D, deduction upto a sum of Rs. 15,000 on premium paid for insurance on the health (Mediclaim) of the assessee and his family. A further deduction of Rs. 15,000 is admissible if the medical insurance is taken for parents of the assessee. It is also provided in the existing provision that if the insured is a senior citizen, the said limit will become Rs. 20,000.
 
It is now provided that if any contribution is made to the Central Government’s health scheme then the same would be also eligible for the deduction U/s. 80 D, subject to the above overall limit.

5.  TDS (Tax Deducted at Source)

TDS on your Salary Income will be deducted from your Salary by your employer during the year based on your Investment declarations made along with relevant proofs submitted for the year.

Besides, the Investments mentioned above tax benefits are also available on -

• House Rent Allowance (H.R.A) if you are living in a rented house and provide Rent Paid receipt copies.
• Interest component repaid on your Housing Loan.

Do make sure that you submit these details, if any, to your employer in order to make correct TDS calculation for the year.

In case, all Investments have not been declared then your employer will end up deducting higher Income Tax from your Salary. You can however , claim this excess Tax deducted from the Government by filing your Income Tax Returns on time with the Income Tax Department.

- Rittique Phukan (CA)