Budget 2009

Budget came and with it as usual some changes. These changes have an impact on our net take home. Let us see the impact of the budget on us.

The tax exemption limit has been increase by Rs.10000/- that means a minimum tax saving of Rs.1030/-

Big savings is for those whose income is more that Rs. 10 lakhs. No surcharge i.e. a saving of 10% of the tax.

In one of my earlier articles I had given details of Fringe Benefit Tax (FBT), now with the abolition of Fringe Benefit Tax (FBT), employees will now be liable to pay income tax on a lot of benefits on which FBT was paid by the employer. Under the FBT regime, the employer paid FBT on benefits such as contribution to approved superannuation fund, motor car provided by the employer, gift vouchers, meals, travel, club memberships and so on. Not only the employer was paying FBT, such expenses were subject to FBT at much lower rates because of specific valuation percentages, which resulted in a lesser effective rate of FBT. However, with the removal of FBT and assuming that the old valuation rules of perquisite taxation would be followed, employees would be liable to pay tax on the normal slab rates, resulting in a substantial increase in their taxes. Ultimately, the tax saved due to abolition of surcharge may get compensated by the taxation of perquisites in the hands of individual employees. In one of my earlier articles Money saved from short term business trips I had mentioned that allowance received would be tax free, since the employer was paying FBT, but with this being removed it would become taxable.

The scope of the annual deduction under Section 80E in respect of interest on loans taken for pursuing higher education has been expanded to include all fields of study including vocational studies. Students, who have taken an education loan to pursue a course, which was not covered till now, would be able to claim this deduction.

In the article Gifts and Taxability, I had mentioned that non cash gifts/gifts in kind were not taxable. With effect from October 1, 2009, individuals who receive shares, jewellery, valuable artifacts or even property valued at over Rs 50,000 as gifts from non-relatives, will have to pay tax. However, such gifts will be exempt, if received on the occasion of marriage, or by will/inheritance.

For those who pay wealth tax the limit has been increased from Rs.15 lakhs to Rs.30 lakhs.
Earlier Advance tax was payable if the tax payable was more than Rs.5000/- this has been increased to Rs.10000/-