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Monday, March 26, 2012

India Budget 2012 - How the Change to Tax Slabs Affect Us

In the previous article "Budget 2012 - Income Tax Slabs Revised in India" we took a look at the changes to the Income Tax policies/slabs in India after the union budget 2012 that was released a few days back. You might be wondering how it affects us. We are going to take a look at few examples so that you can understand the impact better.

Before we begin:

All Calculations done below are done under the basic assumption that the individual has done no tax saving. He is paying taxes on his whole income as received. The actual numbers may vary from individual to individual depending on how much tax they save. There are many sections under which you can save income tax. You may want to visit the Article titled "Income Tax in India" and learn more about it.

Lets get started. We are going to compare the Tax savings of 5 people with income of 6, 9, 12, 15 and 20 lakhs respectively per year. They are split into 3 categories – The Regular Citizens, The Senior Citizens and The Very Senior Citizens.

For Regular Citizens – Men and Women aged below 60 years:








IncomeTax As per Old Slabs (in Rs)Tax As per New Slabs (In Rs)Tax Saved (In Rs)
6 lakhs52000500002000
9 lakhs12200011000012000
12 lakhs21200019000022000
15 lakhs30200028000022000
20 lakhs45200043000022000


Inference:

Overall, though there has been a revision in the tax slabs, it doesn’t amount to more than Rs. 1000/- to Rs. 2000/- per month for a majority of Tax Payers. So, if you were in the dream of realizing a better take home salary after this budget, you are in for a unpleasant surprise. People who are in the Higher Income Range (Between 10 to 12 lakhs) are the ones that reap the most benefits in terms of % tax saved when compared to what they were paying up until this year.

Women enjoyed an additional Rs. 10,000/- income without taxes (Limit was Rs. 1.8 lakhs for men and 1.9 lakhs for women) until this year. The Finance Minister has eliminated this Bias towards women which some may welcome while some wouldn’t. Since the amount of tax women paid on this Rs. 10,000/- @ 10% was only Rs. 1000/- there wouldn’t be much of a difference eitherways…

Verdict: NOT BAD. ATLEAST SOME OF US GET SOME GOOD NEWS



For Senior Citizens – Men and Women aged between 60 to 80 years:








IncomeTax As per Old Slabs (in Rs)Tax As per New Slabs (In Rs)Tax Saved (In Rs)
6 lakhs45000450000
9 lakhs1150001150000
12 lakhs20500018500020000
15 lakhs29500027500020000
20 lakhs44500042500020000


Inference:

There's nothing in this year's budget for the old-age population of India. There is no real benefit if your income is below 9 lakhs. As most senior citizens earning a pension or living off income from fixed deposits don’t manage to earn more than 9 lakhs, this revision in tax slabs doesn’t really make much difference.

Verdict: DOESN’T MAKE A DIFFERENCE



For Very Senior Citizens – Men and women aged above 80 years:








IncomeTax As per Old Slabs (in Rs)Tax As per New Slabs (In Rs)Tax Saved (In Rs)
6 lakhs20000200000
9 lakhs900008000010000
12 lakhs18000016000020000
15 lakhs27000025000020000
20 lakhs42000040000020000


Inference:

There's nothing in this year's budget for the Super Senior population of India. There is no real benefit if your income is below 6 lakhs. There is a marginal benefit for people whose income crosses that limit. But, as with Senior Citizens, the Super Seniors too don’t earn that much and hence, this revision in tax slabs doesn’t make much difference to them.

Verdict: DOESN’T MAKE A DIFFERENCE



Overall Verdict:

The overall verdict from the Union Finance Budget, with respect to Income Taxes has been one of Disappointment. Though there is a marginal tax saving, the increase in Service Tax, Excise Duty and Wealth Tax means that, you will only end up paying more taxes this year than what you did last year.

To top this all, rising crude oil prices coupled with increase in service tax, will push the price of even the essential commodities which is going to make the life of the common middle-class Indian even all the more difficult.

HOPED FOR A BETTER BUDGET THAT ACTUALLY HELPED THE COMMON MAN.



Better Luck Next Time I Guess!!!

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